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Innovation in Retail Banking

Over the years, there has been a growing realization in banking towards innovation as the proven path to differentiation and competitiveness. While the transformation has been slow, over the last decade the industry witnessed an increasing willingness to discard the traditional short-term focus, functional siloes and risk-averse culture towards more meaningful advancements and open culture.

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While traditional banking organizations have lagged in other industries with regard to innovative cultures, the challenges over the past decade seem to be more deeply entrenched at financial institutions in the more developed countries. Evidence of this dearth of exciting innovations by banks in the U.S. and Western Europe can be seen when looking at the big winners at annual financial innovation award presentations.

We have seen over the past several years that start-ups embody the core principles of innovation that drive commercial success. They embrace risk-taking and failure, while rewarding success. They are agile and can pivot immediately to meet market demand and are focused on customer needs. Because they are usually small, they can think big. But because they are small, scalability can be a challenge.

The question is whether banking can replicate the best of fintech start-ups while leveraging their customer base scale advantage to respond to a changing marketplace. Or, will the majority of the industry need to be fast-followers … or laggards, with the inherent risks?