Incremental Innovation: 7 Small but Sure Steps to Success


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Innovation is a powerful weapon of differentiation for financial institutions. In recent years, banks have innovated on their products, processes and channel infrastructure to achieve multiple
objectives such as raising operational efficiency, improving customer convenience and accelerating business growth.

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Incremental Innovation: 7 Small but Sure Steps to Success

  1. 1. Incremental Innovation:7 Small but Sure Steps to Success
  2. 2. Why Banking Innovation? smaller risk of business disruption. Besides adding value to customers, incremental innovation canInnovation is a powerful weapon of differentiation bring about improvement in banking productivityfor financial institutions. In recent years, banks and business growth.have innovated on their products, processes andchannel infrastructure to achieve multiple Thus, incremental innovation focuses on buildingobjectives such as raising operational efficiency, on banking growth.i m p ro v i n g c u s t o m e r c o n v e n i e n c e a n daccelerating business growth. 7 Steps to SuccessBig-Bang or Small Steps? So how do banks decide what and how much to innovate? The following list of incremental bankingAny bank seeking to innovate is faced with two innovations propose some answers:choices: launch a big-bang change or innovate inincrements. The latter approach works well when Step 1: Direct Bankingthe primary objective is to create a quick and The advent of Internet banking laid the foundationvisible impact on customer experience. for incremental innovation in the form of directMostly when banks want to enhance experience, banking. While Internet banking enables users in athey are really seeking to resolve the biggest pain specific country to fulfill basic transactions and staypoints of users and simplify the processes that in touch with their relationship managers, directthey go through. However, it is crucial that banking comes into play at the account openingcustomers recognize the efforts of their bank and stage itself, allowing customers to complete sign-actually perceive the improvement in experience. up formalities with a couple of clicks. CustomersSpeed is the key here – customer discontent can need neither meet with a bank representative norturn into delight only when banks take swift call a contact centre to start an account! What’scorrective action to alleviate a problem. Left to more, direct banking knows no geographicfester, small complaints can turn into major issues boundaries, and banks are increasingly employingand in the worst scenario, drive customers away. this channel to enter new markets quickly, withoutIncremental innovation provides banks this much investing in physical infrastructure. The wonder ofneeded agility. Using this approach, they can take this innovation is that it can be implementeda series of small, yet effective steps to bring about anywhere by leveraging the existing technicalcontinuous improvement, all along engaging with environment and data centre and exportingtheir customers and making them feel cared-for. whatever is required online. Step 2: Online Interface with a Human TouchEven as banks innovate to improve the bankingexperience of all users, they recognize that the While most banks provide contact centrebenefits of their initiatives will mostly be enjoyed by helpdesks, the customer service agents are oftentheir younger customers, who are willing to try new overloaded, forcing callers to wait minutes or trytechnologies, products and processes. In again later. This problem can be quickly resolvedcontrast, the older generation of customers will using “Push-To-Talk”, an easy to implementlikely stay with familiar products and channels. technology that enables customers to place anThe biggest advantage of incremental innovation is online request for a bank representative to call themthat it takes fewer resources, especially when back at a time of their choice. Alternatively, bankslaunched over a modern core banking platform. At that have online channels can provide a web chattimes, incremental innovation may not even be facility by pre-bundling the same with an applicationabout changing a solution, but rather, presenting it server that is exposed to the customer. Or they canin new ways. Since the changes are small, they go a step further by turning it into an audio-visualcan generally be implemented quickly, at low cost. chat in which customers can see whom they’reMore importantly, incremental innovation poses talking to. Using unified communications Incremental Innovation: 7 Small but Sure Steps to Success
  3. 3. technology, banks can extend this feature into a their Internet banking offering, so that customersremote audio-visual advisory service, whereby are spared the effort of manual data entry becausethey can share screens with callers and guide them the system does it on their behalf. The tools can bethrough the discussion. Thus, a problem solving further enhanced with basic graphical and advisorymechanism is elevated into an advisory solution capability.through the effective combine of ‘tech’ and‘touch’, delivered through incremental innovation. Step 6: Digital MarketingStep 3: Product Bundles Rather than carpet-bombing customers indiscriminately with marketing messaging, banksThis incremental innovation calls for creativity can rely on digital marketing techniques to improverather than effort or investment. Banks can derive effectiveness as well as reduce costs. Analytics canadditional sales from their existing product help banks better segment their customers andportfolio by proposing bundled offers that promise predict future behavior on the basis of past trends.the right package to the right customer at the right This insight can direct marketing andtime, through the right channel. For instance, a communications strategies at the right targets. Forcustomer with a fresh home loan may be offered instance, a customer who trades often on hishome insurance at a preferential tariff. An airline demat account would be delighted to receive stockticket booking through credit card might signal the alerts via SMS or a microblog.need for traveler’s cheques and travel insurance.Making the right offer at the right time through the Now, banks have a new and powerful tool in theright channel goes a long way in simplifying the form of Web 2.0 technology. They must create anproduct acquisition process for customers. adequate presence in social media whereby they can engage with interested parties, gatherStep 4: Partner Portals feedback, resolve queries and seek new ideas. Establishing an online community or a ratingsWhat’s more, banks need not do it alone – by mechanism on the banks’ portal are someanalyzing the primary needs and interests of their examples of incremental innovation in the digitalcustomers and accordingly tying up with a few well space. Extending this concept, banks can testchosen partners such as hotels or retail stores, market new products and services to a limitedthey can earn additional revenue through the sale number of loyal customers and ask them to provideof linked financial products each time these their feedback or issue testimonials in onlinepartners originate new business. This can be communities. Going forward, this type of innovationimplemented by setting up a partner portal could spur co-creation. For instance, they can seekfeaturing information on all the offers from the their customers’ viewpoint about a proposedbanks and their partners. In this way, banks get to product bundle. Should they find that customersparticipate in banking as well as non-banking react positively only to a part of the offering, theytransactions and their portals become an can quickly re-design the bundle. By acting in thisindispensable part of their customers’ lives. manner, banks can demonstrate that they value their customers’ opinion, which will go a long way inStep 5: Personal Financial Management Tools cementing relationships.Certain banks offer financial management tools as Step 7: Unified Relationship Statementan add-on service. By punching in various datapertaining to their financial transactions, Today, customers juggle with as many statementscustomers can use these tools to draw up as banking accounts, receiving one for loans,budgets, plan investments, and compare different another for savings and a third for credit cards!retirement schemes and so on. Instead, banks can Apart from being inconvenient to manage, separateinnovate by making these tools a regular part of statements do not provide customers with a bird’s Incremental Innovation: 7 Small but Sure Steps to Success
  4. 4. eye view of their financial position at any given time. AuthorIf banks can innovate to produce a single monthlystatement that reflects a banking relationship in Arunnima B Sentirety, it would provide much value to the Finacle - Product Strategyrecipient. With a consolidated statement, banks Infosys Technologies Limitedcan present a picture of the net worth of eachcustomer and suggest ways to improve thatnumber. This type of advice would be particularlyappreciated by average, small-ticket customerswho are ordinarily not eligible for privileged bankingand hence have a genuine need for guidance whiletaking financial decisions.All Round AdvantageBesides benefiting customers, these incrementalinnovations can positively impact cost efficiency,productivity, growth and customer retention atbanks. The cost of servicing customers comesdown significantly in unassisted channels; if onlinechannels can be personalized with a human touch,by introducing a remote advisory service forinstance, they will attract more customers anddrive down costs in the bargain. Likewise, bettercustomization of product offers through “rightbundling” can improve cross-sales. Collaborationwith customers can not only throw up new ideasbut also prevent banks from going wrong with anew strategy.Technology has been the single largest enabler ofbanking innovation in recent years. On the flip side,legacy systems and outmoded processes canpose the biggest hurdle. If an innovation cannot beimplemented quickly, it will likely lose impact;worse, it allows the more fleet-footed competitorsto get ahead. Modern core banking platformsempower banks with the flexibility to introducefrequent changes and launch them with agility.Moreover, since the cost involved is low, banks canearn a return on their investment right from thestart. Incremental Innovation: 7 Small but Sure Steps to Success