IT and Channels : The twin engines of banking innovation?

Although channels have been the top focus area for banking innovation in recent years, they haven’t run out of steam. Most banks today have a good vision for their channel strategy – one that builds a strong partnership with customers and puts them firmly in control of the relationship. A few interesting examples on how banks across the world are powering their innovation agenda using channels, technology or both.

Barring a few countries where regulatory or cultural issues present a hurdle, online modes are at the forefront of channel innovation everywhere. And why not, since the online channel is effectively every bank’s largest branch! In Spain, most banks offer their entire product and services suite online; Turkey is a model of mobile banking progress, where one can locate an ATM and withdraw cash from it, using not a card, but the mobile phone! Kenya has launched card-less, mobile-enabled peer to peer payments at commercial establishments. And although Portugal still faces cultural resistance to Internet banking, that hasn’t stopped banks from launching innovative services such as online deposit and loan auctions.

And now, channel innovation is going beyond improving customer reach and convenience, to address online security issues. A Turkish bank is employing two-level transaction authentication, one through the bank and the other through the mobile operator, along with electronic signatures to further improve the security of mobile banking.

Interestingly, the view from most bankers on the role of IT in innovation had one of the two seemingly opposite views – those from legacy-centric banks felt it was a big barrier, whereas those representing institutions that had already transformed their core systems acknowledged it as the key enabler. Several belonging to the former group felt that it was possible to innovate even without elaborate IT infrastructure. On the flip side, Service Oriented Architecture and Virtualization seemed to have found favour with the IT-believers, who felt that these two would be the prime movers of banking transformation. Of the other technology-driven innovations, the use of mobile banking to reach unbanked markets and RFID technology for in-branch customer authentication has exciting prospects. And banks are still looking for technologies that can enhance sales and advisory skills of front-line executives by allowing them to collaborate in real-time with other bank staff having specialized skills.

So channels…technology….et al…it certainly seems like the innovation game will keep us all up and running for quite some time to come….