When IT Becomes a Drag on Innovation
FIs want to innovate – 97 percent of banks and credit unions surveyed told PYMNTS they have focused on innovation over the past three years. So, what’s stopping them?
If you ask the FIs, it’s all about IT infrastructure.
For the inaugural edition of the Innovation Readiness Index, an i2c collaboration, PYMNTS surveyed more than 200 FIs to find out what’s fueling, and frustrating, their payments innovation. And while there were a number of factors holding back banks and credit unions from reaching the wildest corners of their innovation imaginations, the main offender was a lack of IT infrastructure.
Thirty-six percent of FIs say their existing IT infrastructures made payments innovation hard or very hard. What’s more, FIs with flexible IT infrastructures are twice as likely to be successful at innovating. For the FIs that said their IT infrastructures made it very easy for them to innovate, their recent innovations had a 70.4 percent success rate.
But infrastructure isn’t the only problem making it a struggle for FIs to innovate.
For FIs, staying competitive means keeping a finger on the pulse of evolving consumer needs and quickly deploying innovative payment solutions, instead of playing catch-up with the leading players.
Other key takeaways from the Innovation Readiness Index, an i2c collaboration, include:
- 63.0 percent of FIs identify meeting customer needs as the main driver for innovation.
- 83.6 percent of FIs run core processing systems without a sandbox for development innovation.
- 39.7 percent of top innovators use sandbox-to-scale functionality.
To find more news and insights, including 350 data points, check out the new Index.
An Opportunity to Hone Innovation Efforts
These IT and innovation challenges are no surprise to many in the banking industry, including Edward Gross, director of payments and operations for the American Bankers Association.
Just ahead of the launch of the Innovation Readiness Index, an i2c collaboration, PYMNTS’ Karen Webster caught up with Gross to review and discuss the results of the research.
Gross said that he ultimately believes the data outlined in the Index will help banks realize they are not alone as they seek to address their innovation strategies. He also noted that the findings may prompt some FIs to reconsider which institutions and companies pose the biggest competitive threat.
“The issue of who the competition is will probably create [the] most soul searching among the banker [community],” Gross said.
About the Index
The Innovation Readiness Index, an i2c collaboration, measures the likelihood of FIs implementing successful payments innovation. The Index includes survey responses from more than 200 banks and financial institutions. As part of the survey, PYMNTS asked banks to gauge the success of their most recent innovations, then ran a regression of various features and attributes of the FI to determine which had a statistically significant impact on the likelihood of an innovation being successful.