Norway, one of the smallest countries participating in the 2018 Winter Olympics, is leading the way in terms of medals. Naturally, one might say, as the country has long winters and lots of snow. But this small nation was not always so successful. In 2006, it returned from the Winter Olympics with just two gold medals and its tail between its legs.
Then it got to work.
Financial institutions (FIs) can follow the same path to victory, regardless of size, says Karen Webster. The Innovation Readiness Playbook produced in partnership with i2c, showed that size really doesn’t matter when it comes to determining the top performers in FI payments innovation. With the right strategy and investments, a bank of Norway’s stature could find itself outperforming much larger institutions.
So what does it take to get there? Webster and Lisa Fugate, VP of product management for i2c, unpacked it all in a recent discussion on how to make a top FI payments performer.
Four Things Winners Have in Common
Fugate said there are four key attributes that play into being a top payments performer: planning, funding, infrastructure and speed to market.
Seventy percent of top performers demonstrated all four attributes – logically, said Fugate, since the attributes play into one another. For instance, a well-funded strategy contributes to speed to market – and beating competitors to market is a big deal. Ninety percent of top performers do it.
In terms of planning, Fugate noted that top performers had a focus on innovating features over the next three years, and had clearly defined priorities for that same time period.
As for funding, the most successful FIs are allotting half of their budget (or more) for innovation, with a focus on payments innovation over other areas.
Infrastructure, said Fugate, can make or break an FI’s bid for innovation success. It should make innovation easier – yet 30 percent of FIs say their current system actually makes innovation harder. If a bank’s core payment systems are suited for innovation, she said, that leads to flexibility and configurability as new concepts are developed and deployed.
Finally, top performers take innovation from the idea phase through development and get it to market within six months. Innovation projects are completed on time or even early.
Innovation Is a Mindset
It all boils down to adopting an innovation mindset, Fugate said. It’s a competitive market, between the banking ecosystem and the frenetic pace of FinTechs clamoring to get to market before competitors. The right mindset, noted Fugate, enables top performers to get there first – but embracing that mindset takes work.
Fugate shared four tips to help FIs achieve it.
First, she said, make innovation a core competency. Talk about what it really means. It’s not just “the next big thing,” and seeing it that way can make progress seem overwhelming. Instead, FIs should look at feature functionality and segment-specific innovation, Fugate suggested, then use available technology in new ways to achieve it.
For example, multiple lines of credit for different purposes, application for multiple currencies and the ability to move transactions are all existing capabilities – but combining them in new and different ways changes the game. That’s innovation, said Fugate.
Second, monetize innovation. Tie it to a specific business strategy with goals and milestones – and, of course, funds to back it all up. Remember, said Fugate, that top performers are spending half their budget on this, if not significantly more in some cases.
Third, though it sounds counterintuitive, Fugate said FIs should ditch the innovation labs. These may sound like a great idea, but she said they end up keeping developments in silos rather than contributing to a cultural mindset shift across the organization.
Innovation must become part of the fabric of the business and its everyday activities, she maintained. The organization must accommodate real-time customer feedback, scaling and speed to market – which is difficult, if not impossible, to achieve in a vacuum.
Finally, Fugate said, utilize multiple innovation methodologies. Seventy percent of top performers use three or more methods at once, from sandbox-to-scale to customer-suggested innovation. Conduct cash and ROI calculations, she suggested. Test new concepts among employees and customers instead of waiting for partners to suggest these ideas. That, Fugate said, is the difference between being proactive and reactive.
Listening and vetting are equally important in this process. FIs know their customers best and should listen to what they have to say, Fugate posited, but they must also consider how those suggestions would play out if the organization went forward with implementation.
“Failure is okay if you understand through metrics why it happened,” Fugate said. “Failure now leads to better solutions later.”
Where to Invest
Top performers, said Fugate, tend to invest in more complex areas that generate higher returns. Mid-tier performers who hope to make it to the top should build their way up by investing in payment technology, consumer engagement, data analytics, mobile and digital, and user experience.
Furthermore, Fugate noted, FIs must invest in the right staff to drive growth in these areas. Experts can provide insights and guidance for FIs with top-performing visions. They can help organizations segue between investments as one category dovetails neatly into the rest and supports other focal areas, such as fraud management.
Driving top-of-wallet is always a priority, Fugate acknowledged, but getting there takes a holistic approach that puts the customer first and builds a complete experience that benefits both the consumer and the bank alike.