An innovation consultant is predicting that banks are in for a personality makeover that'll change how people think of them. Here's how he sees it playing out.
The mandate is that banks need to be more innovative and many of them are working on ways to achieve that. The "how" of it is daunting, but perhaps a little less so if you look at how innovation has evolved in the past, says Larry Keeley, the president and co-founder of Doblin and a speaker at the recent "Exponential Finance" conference in New York.
"Industries do not change randomly," says Keeley, who has studied innovation in large organizations for 30 years. "There are recurring patterns that happen over and over again and those recurring patterns are your friend when you're trying to guess what's coming around a bend in the road."
In reviewing the development of the financial services industry, he cites "physical factors," "trust factors" and "security factors" as the stages we have already experienced. He says we are now stuck in a stage he calls "credit factors" and about to move on to "goal factors." The difference between the two amounts to a kind of attitude adjustment. The industry is in a stage where it locks people out based on a secret credit score. But what Keeley sees coming next is the use of "clouds, crowds, partners and prizes" to help people learn what they need to do to reach their goals and gain greater levels of inclusion in what he calls the cool kids club.
"I think we are going to see that the savvy firms will start to align their incentives and rewards around the delivery of customers' goals," Keeley says.
When that happens and our annual Survey of Bank Reputations indicates that it is already how the most reputable banks are thinking Keeley predicts an end to the powerful negativity directed at the industry and an opportunity to focus more intently on innovation. "Most of the enmity that exists between Congress and financial services will start to dissipate and we'll see a much deeper level of 21st century alignment around breakthroughs."
Keeley also says that some innovations are vastly superior to others and that those trying to create something valuable should think less about products and more about platforms and ecosystems. He points to cancer centers as one example of an ecosystem. "Every cancer center you're seeing everywhere in the world orchestrates the activities of dozens, usually thousands, of companies into an experience for physicians and patients that does what you need to do for that very complex and costly condition."
Another example is Airbnb, which, Keeley says, took four years to amass more than 6,000 properties available for use every day. In contrast, the world's largest hotel chain took 133 years to get to that same number of rooms. "Airbnb's capital deployment tied up in those rooms is zero dollars," Keeley says. "These are ecosystems and ecosystems are a really big deal."
He says financial services innovations will be the building blocks of ecosystems that are "truly useful and game-changing" for helping people achieve their goals.
"If you start thinking about the world of ecosystems, you will see that they are everywhere, in lots of different industries," he says.
"Each one of them fills an entirely new kind of value web where the cost of the resources being deployed is massively lower, and the reach and the value of those resources are massively amplified. These are the structural reasons why what we're absolutely going to see is a new kind of ecosystems warfare in financial services."
Keeley says he's tired of hearing people in fintech say they are creating "the Uber of financial services."
"I want you to take this analogy for a moment and look at it like a good innovator would," he says. "Squint at it a little funny and ask yourself, 'What's truly new here?'"
His answer: nothing.
"What it really is, is an elegant integration of well-known technologies, many of which have been around for decades," he says.
Keeley says that is typical of a lot of the advances happening these days. Industries undergo a level of transformation that comes from the steady accumulation of tweaks. These tiny improvements to the known come together in a way that's more integrated and more beautifully thought out to create a better user experience.
Dramatic innovation, the kind that changes an industry, is more elusive. But he says financial services is on the cusp.