Innovative Ideas for Banking: Can Banks Innovate?

Steve BushStarred Page By Steve Bush, 3rd Oct 2014 | Follow this author | RSS Feed | Short URL http://nut.bz/3vukircv/
Posted in Wikinut>Business>Accounting & Finance

While banks like to say how innovative they are, very few actually innovate in a way that is helpful to their customers. When will banks get the memo about how important innovation is to their survival?

Innovation Is Crucial for Business Growth — Did Banks Get the Memo?

Banks continue to operate in mysterious ways. If not for a government bailout in 2008-2009, many banks would have gone out of business. Perhaps you are now wondering why we saved the banks in the first place. Even Sheila Bair — head of the Federal Deposit Insurance Corporation at the time — offered little encouragement when she said: “The banks should have been let go.”

It is apparently obvious to everyone but the bankers that they need to innovate — do things differently. In response to this criticism, banking institutions like to talk about how they are innovating — but are they really?

In one survey measuring the value of innovative ideas to any business, over 50 percent of corporate executives ranked the ability to innovate as most important to business growth. Banks and credit unions often emphasize innovation in comparison to the competition. It is not unusual for many banks to have a dedicated innovation agenda and staff — but actual implementation of innovative ideas can differ widely from one bank to another. As noted by Ty Kiisel when discussing banking industry innovation in an article published on the Forbes website May 5, 2014, “And, by the way, saying you’re innovative doesn’t make you innovative.”

Just in case they missed the memo, here are four areas that banks need to achieve some real innovation in if they hope to survive much longer.

Improving Financial Data Security

Financial data thefts have been newsworthy events for several years, and more innovation is still needed to address this problem. Credit cards using one-time passcodes represent an innovative banking idea to defeat hackers and make customers more comfortable with using a credit card. For example, a one-time passcode generator is among the few practical strategies for dealing with credit card skimmers that can obtain your financial data while you are using a credit card at retail locations and ATM machines. For now, this innovative approach for improving security of credit card data is not widely available through most banks.

In case you are not familiar with the threat posed by credit card skimmers, here is an instructive video:

After I watched the above video for the first time, my immediate reaction was thinking how this criminal technology could spell the end of credit cards and consumer banking as we currently know it. Perhaps that is not such a bad thing — forced change due to a lack of innovation by banks.

Easier Loans: Online Loan Innovations

When businesses and individuals need a loan, the traditional process involves filling out applications with each lender. This makes it difficult for borrowers to compare rates, but it also limits banks and credit unions to a smaller pool of borrowers — those that walk in the door or go to a bank’s website. Some innovative business models such as loan auctions involve needed improvements. The loan auction process uses an online network of lenders and borrowers to match parties efficiently. The loan auction site can also combine multiple lenders to fund a loan.

Debt Consolidation

As businesses and individual consumers take on more debt, an innovative solution for managing the debt will benefit borrowers and lenders. Multiple financial payments can be difficult for anyone to juggle. A debt consolidation account can make financial life easier by creating a unified account for all debts such as mortgage payments and other monthly obligations — all linked to one checking account.

Keeping Up With Social Media

One driving force behind the ongoing need for banks to innovate constantly involves the millennium generation — also called Generation Y. These are younger banking customers that rely heavily on social media and technology in their daily lives. Innovative ideas to serve this constituency include increasingly-sophisticated mobile applications. For example, one service allows kids to shop online and send the bill to parents by email — the purchase process is finalized after parents make payment. Regardless of current banking innovations to serve the 75 million members of Generation Y, banks and credit unions will need to keep their innovation hats on and keep innovating to meet the changing needs of this tech-savvy group.

Images provided by Stephen Bush under End User License Agreement.

Tags

Banking Innovation, Business Innovation, Credit Card Skimmers, Debt Consolidation, Innovation Trends, Innovative Ideas

Meet the author

author avatar Steve Bush
Steve Bush is a business finance consultant and writer. He served in the military as an officer in the U.S. Navy Supply Corps. Bush obtained an MBA at the University of California, Los Angeles.

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