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While there is no doubt that banks around the world fast tracked their digital transformation plans as a result of the pandemic, a report from Accenture posits that the rapid growth in digital services may have negatively affected innovation in the sector. In order to overcome this and truly innovate for the customer, local banks need to re-assess their innovation culture and lean into as-a-service models that are known to deliver. 

The Accenture report, The Ultimate Guide to Product Innovation in Banking highlights the innovation paradox, saying: “The reality is that, over the past decade, banks’ products have converged toward functional equivalence while becoming emotionally devoid. And as banks increased their reliance on digital touchpoints during the pandemic, they became even less connected with their customers. To add to this paradox, zero rates have distorted the market, driving many banks to focus on individual products instead of the customer as a whole. As rates continue to rise, the limitations of this approach will be exposed, proving a new reality of value for banks.”

“In some industries, particularly the technology and fintech sectors, South African enterprises have shown significant innovation and growth. Startups and companies in these areas have been leveraging technology to create innovative solutions for various challenges. However, the level of innovation in South African enterprises varies significantly due to factors such as access to technology, a scarcity of skills, bureaucratic hurdles, macro-economic conditions, government policies, access to funding, and the overall business environment, says Salomon Erasmus, Regional Head: Strategic Business Development at Network International.  

Looking more closely at the financial sector, Erasmus says he believes that open banking can help drive innovation in the industry. 

“Open banking helps usher in new players, foster collaboration between banks and fintech startups, and offer consumers personalised solutions. However, the success of a fintech's card solution relies heavily on the product design and more specifically the user (consumer) experience design. This will determine whether it becomes the consumer's primary card or, as is currently the case, consumers continue to favour Tier 1 banks for their primary accounts,” he warns. 

One of the main challenges when it comes to innovation in large organisations is siloed operations. Erasmus says when departments operate independently, without collaborating or sharing information effectively, it can seriously hamper innovation. This results in a reduction in communication and knowledge sharing, duplication of efforts, a lack of fresh ideas, poor problem-solving, resistance to change and, ultimately, a slow response to market shifts. More importantly, he warns that in a rigid and siloed structure it becomes impossible to align

the user experience across the organisation, saying this is where innovation often fails.

“To nurture a culture of innovation, large companies must actively dismantle silos and encourage cross-functional collaboration. Leadership needs to instil the importance of collaboration and reward knowledge sharing. They should also allocate resources to dedicated innovation initiatives across the organisation. Only by breaking down silos can large companies unleash the full potential of their talent and create an environment where innovation flourishes,” Erasmus advises. 

Using the as-a-service model to drive true innovation

Businesses, and banks in particular, looking to innovate products that truly answer customer needs don’t necessarily need to overhaul all their systems and processes. Erasmus points out that the 'as-a-service' model allows organisations to quickly adapt to changing market demands and experiment with new ideas without the burden of managing complex infrastructure. 

“The reduction to upfront costs and access to cutting-edge technologies level the playing field, especially for startups and smaller businesses. This stimulates a more diverse and competitive ecosystem. What’s more, the continuous updates and enhancements provided by service providers ensure that the organisation stays current with the latest developments, fuelling a culture of ongoing improvement and creativity,” Erasmus says. 

Placing innovation at the heart of product development

Network International spends a good deal of time collaborating with partners when it comes to designing products that address customers’ immediate and future needs. 

“We place innovation in payments at the core of our organisation with our technology department consistently pioneering cutting-edge solutions to enhance the digital payment landscape. By fostering a culture of creativity and staying at the forefront of technological advancements, we ensure our tech and product teams play a pivotal role in shaping the future of secure and efficient payment systems” shares Manav Mehra, NI's Chief Product and Design Officer. 

Erasmus believes that if banks want to avoid the innovation paradox described by Accenture they should ensure their strategy and innovation roadmap are aligned, embrace a more risk-tolerant culture, exercise some patience, and ensure their organisation’s structural design is aligned with the process the user goes through.

“Innovation inherently involves some measure of risk taking, but by accepting a tolerable level of risk and understanding that innovation won’t always deliver immediate results, companies can build an environment conducive to experimentation and creativity. Choosing to work with a partner that has experience in helping companies innovate will also help businesses step away from churning out disconnected products and become a brand known for delivering holistic consumer solutions.”