Bill Gates famously said, “banking is necessary – banks are not”, encapsulating the raging battle being waged for market share by innovative and disruptive technology companies against banks.
Although financial services are becoming increasingly commoditized, the reality is that while banks remain the overwhelming force in the financial services market, they are facing a fundamental shift in consumer banking habits that are upending the traditional banking business model.
According to Forrester Research*, 71% of US online adults are online bankers and of these, 29% are mobile bankers.
As more and more consumers migrate to the Internet for their banking needs, banks, both large and especially small, must embrace the digital and innovation reality that the online world is now the dominant sales channel for financial services, and as such, they must move to ensure their place. In the US today, Forrester Research reported that 48% of consumers reporting accessing financial products through the Internet compared to 32% going to a branch to access face-to-face. These figures will continue to tilt toward the Internet, both in the US and throughout Latin America.
But all is not lost and Banks are finding that the key is not what they do, but in how they think. Banks must begin to embrace the idea of innovation and collaboration as important components to the institutional culture.
When the Citi Latin America’s Digital Banking team was looking for ways to develop and kick start an innovation strategy, they looked to CVOX Group, our small PR, Marketing and Event firm specializing in finance and technology. We recommended the creation of a developer challenge, or hackathon, that would allow Citi to engage the technology and innovator community through a contest that would essentially cowdsource innovation. Thus, the Citi Mobile Challenge 2014 was born.
The results were spectacular, with the CitiMobile Challenge receiving over 120 submissions from teams throughout the world, 46 of which were invited to present at two demo days in Bogota, Colombia and Buenos Aires, Argentina, respectively. As a bonus, we helped Citi collect of 45 positive news stories around the challenge.
While Citi went big with its effort, the reality is that the principals used in crafting this strategy was simple – embrace innovation and collaborate. While banking security will always be a core pillar of banking, banks must resist the default position that this buttoned-up approach for all of its endeavors.
Innovation is an inherently risky undertaking, as it means experimenting and failing until you find a solution and collaboration is risky because it means sharing your strategy and approach. But once banks realize that these two are critical to the long-term prospects of the institution and in fact, can be complimentary to banking security, they can begin to take a more offensive approach in the battle for the hearts and wallets of the consumer.