5 Barriers To Innovation In Digital Banking, And How To Overcome Them
The banking industry offers many opportunities for innovation, but these opportunities often come along with roadblocks. We look at ways to address industry roadblocks and innovate successfully.
Earlier this year, we conducted a research survey relating to design and innovation competency within organizations. Our goal was to better understand the root causes of innovation and design breakdowns, and to identify ways to empower companies in achieving transformation.
The survey results indicated that a shared vision across all pillars of product development is the missing link preventing successful innovation at many organizations. The majority of respondents expressed their organizations both lacked strong design vision and struggled to integrate design into the overall product development process. The survey included organizations across industries, including banking.
Digital Innovation In Banking
The banking industry is highly established, and the industry’s longevity means many banking-related processes and services are deeply-rooted in the ways that things have historically been done. This traditional framework means that there are myriad opportunities for digital innovation in the banking industry, but it can also make it more challenging to achieve transformative innovation.
Common Barriers to Innovation in Banking Services
There are some specific reasons that breakdowns occur during innovation. We look at a few of these roadblocks and root causes below.
Rigid Industry Structure
The banking industry is highly-established and rooted in tradition. Long-standing processes, systems, and methods are not only expected but are deeply ingrained into how banking companies operate. As a result, ideas for banking innovation can be more difficult to identify and get buy-in from internal stakeholders than in some other industries.
Trust is paramount in banking, due to the nature of the products and services offered. Outdated products or user experiences, including those that lack a high level of polish or include design and functional bugs, often present trust issues. Many smaller banks without established brand recognition additionally struggle to achieve consumer trust at the most basic level. If a company isn’t trusted, it doesn’t matter how innovative they are – consumers won’t buy in.
There is a good deal of regulation surrounding finance and financial products, and this amount of regulation poses a major barrier to innovation. In banking, there are times that an organization may want to change or improve a digital experience, but find they are prohibited from doing so (or from doing so creatively) due to legal regulations in the industry.
Banking products or concepts are sometimes difficult to explain to consumers, especially consumers without a strong financial background. Tricky terms and minute details can add layers of complexity, which can be a roadblock to innovation (although this complexity can also provide an opportunity to capitalize on the benefits of innovation when in the right hands).
In banking, there are times that an element of the products or services must be provided by a third party (for example, a consumer credit score). In these instances, it is common for a third-party service to “take over” the customer experience at some point, whether that be by a redirect or a pop-up on the site. This can mean an inconsistent and confusing customer experience and a disconnected look and feel, and is often a somewhat unavoidable challenge that must be provided for.
How to Avoid Breakdowns and Implement Innovative Ideas in the Banking Industry
When it comes to technology innovation in banking companies, there are a few methods that address the root causes of breakdowns. The following will help any organization get around industry challenges that get in the way of innovation.
Identify Underlying Reasons
When approaching any innovation issue in digital banking, it’s essential to not only identify what isn’t working, but identify why something is not working. Simply knowing what users are doing, or where they’re becoming disengaged, is not enough. Providing better banking services through innovative ideas is dependent on first achieving a deep level of understanding of the user.
Conduct User Research
User research is absolutely essential to uncovering opportunities to improve customer experience in the banking industry. User research can vet ideas and enable smart business and design decisions. Devoting even a minimal amount of time and resources to user research is hugely beneficial. This research can be lightweight, and is always something to lean on for driving alignment decisions. It allows companies to understand users for an improved user experience, which is key when considering challenges such as regulation and third-party integrations.
Provide Visuals or Wireframes
Communication can be easier when there is something to look at and talk around. When sharing paradigm-shifting ideas for banking innovation, creating a prototype to illustrate concepts is hugely helpful. Visuals are instrumental when talking teams and stakeholders through the flow, and help present solutions in an approachable manner that clearly illustrates the power of the innovation.
Take A Customer-Centric Approach
Many barriers to innovation in banking stem from a disconnect between how the bank thinks of something versus how their customer does. If you’re ready to open the door to the power of digital tools, it’s necessary to separate the two and take a more customer-centric approach, which opens the door for innovation. In the case of specific roadblocks, such as an inconsistent third-party experience, examining the problem from the customer’s viewpoint allows an organization to innovate through customization, providing options or messaging with details and transparency.
There are many opportunities for innovation in the banking industry. Following the tips above, and remaining focused on the customer, will help pave the way to success.