i2c VP: For Top Performing FIs, Infrastructure Matters, But So Does Mindset

When it comes to innovation, there’s the doing — the blocking and tackling, the buying of software and hardware, the going live.  And there’s the readiness, which is what underpins it all.

The mindset, you might say.

And when it comes to innovation in financial services, the readiness shows sharp divisions among strata of financial institutions, from big banks to credit unions, which translates into room for improvement when bringing new products to consumers — the kind that keeps them coming back for more.

In the latest Data Drivers, Karen Webster spoke with Lisa Fugate, VP of Product Management at i2c, springboarding off the findings of the newest Innovation Readiness Playbook.

Just what makes a top performer among FIs?  It takes more than just tech.  It takes engagement — enabled by tech, to be sure.

But to be truly innovative — to move beyond the 80 percent that find themselves in the middle of the pack, so to speak — Fugate said that firms must develop relationships beyond just a service or two that they do well, and they must think holistically.

Said Fugate, “The biggest thing about engagement right now is that we’re living in a different time than we did even five years ago. Customers and consumers and businesses — now they are very specific about how they want to communicate, with what methods and with what information.”

Now, with the advent of digital, FIs strive to be ‘top of phones’ instead of just ‘top of wallet,’” she said.

Engagement, as a concept, may have been lumped in with loyalty and marketing — but now it has become much bigger, she said:

Think about communication as a two way street, where it can be done across settings – in branches, mobile, over the phone — and it’s more about the customer experience than just trying to push products out.

Yet as Webster noted, there is a bit of a cliff between that 80 percent of top FIs that emphasize features over new products and, say, the 40 percent of community banks and 37 percent of commercial banks that do the same.

“Community banks and credit unions have a service-oriented brain.” And those firms, said Fugate, may already be engaging in customer engagement. “But that doesn’t mean they are doing it the same way as the top performers. It doesn’t mean that they’re supporting engagement with the technology right or supporting it with a broader plan,” she said.

Webster asked about stumbling blocks — and as Fugate noted, firms may be stymied by trying to innovate too broadly, or they may not have the right mechanisms in place.

Webster stated that 93 percent of top performers have already identified what we think of as table stakes like P2P and digital wallets as “must haves” when it comes to innovation.

When it comes to payments technology, there seems to be strong focus among the top performing FIs, as 87 percent train their sights on payments, with 79 percent of credit unions — and yet only 40 percent of community banks.

The dwindling numbers can be boiled down “I do not know how I would do it, even if I wanted to. I do not know how to get from point A to point B,” as Fugate put it – in other words, trepidation about embracing new technology in general.  Technology, she said, “is a little bit paralyzing. These are big scary things that need to be looked at and done. And I don’t know if there’s been a way or a focus or a vision or somebody coming out and saying ‘here’s an easy way to do this.’”

As for the top performers, 73 percent of them say that the core infrastructure is in place to be well-suited for innovation, but only 61 percent say the same among the middle-tier performers.  There’s work to be done, said Fugate, and technology moves quickly. The less-than-top performers have limited resources.

Delving into technology a bit, roughly 60 percent of top performers are able to work with configurable systems. But only 19 percent of mid-sized banks globally can do, according to the findings, along with 20 percent of community banks.

This has to do with legacy systems, said Fugate. Embracing a configurable model means they have to change at a rate they might not be used to. If inflexibility of legacy systems and infrastructure holds innovation back, it also interferes with the ability to test new ideas. As Fugate noted, among the top performers, one standout is ability to conduct sandbox testing. Top performing FIs are “able to test things quickly — they’re able to put things out and take them away,” said the executive. “They’re able to make changes pretty rapidly so that they can get to market faster.”

“Use is a big piece of it, and it’s a way to understand whether your bet has paid off and whether it’s something that you should continue doing.”

In measuring the returns on innovation, ROI matters, but top performers also look at returns in different ways — including how they get feedback from their employees.

The 80 percent of FIs that are in the middle of the pack have no cause for doom and gloom, said Fugate.  The impacts of innovation and culture are things that “every individual and every organization should be focused on … it’s a time for, you know, taking a different look at how you do things. How do you engage differently? How do you put in the right I.T. infrastructure that has the things you need to get to market? Now’s the time to do it, ” she added.