Sometimes innovation emerges from unexpected places. How about the folks in a 173-year-old house-turned-bank-headquarters in Virginia teaming with software partners in India? That's how Carter Bank and Trust CEO Worth Harris Carter Jr. plotted with imaging vendor VSoft to create a new core processing system that would give him the a custom-made solution to integrate 10 banks.

Or consider Intuit Financial Services, where strategic acquisitions brought together Turbo Tax software and Digital Insight's Online Banking platform to create an online tax preparation system that surely resulted in thousands fewer tax-time headaches for consumers.

Then there's Countdown to Buy, a startup inspired by a house that lingered on the market for a long time, and resulted in an automated way for banks to sell their REO properties at the best possible price.

All of these, and the 17 other Innovators honored in this year's 9th annual The Innovators issue, have one thing in common: they represent the kind of risk taking and forward-thinking products and services the American financial services industry needs to leapfrog out of the financial crisis and bring the next level of value to customers.

And though our collection of Innovators is small, surveys indicate banks are maintaining their commitment to spending on innovation. More than 51 percent of financial services executives polled by Accenture said their company hasn't pulled back from its investment in innovation, and a full 20 percent said that investment has been increased. The Boston Consulting Group had similar findings in its 2010 global innovation survey of multiple industries. The poll found 72 percent of companies globally said innovation was a top-three priority, up from 64 percent a year ago.

The devil is in the details in that statistic though. Developing companies like China and India pulled the average higher; just 61 percent of US firms said innovation is a top priority, down from 63 percent last year. And there are few financial institutions known for their ability to innovate. A BCG list of the 50 most innovative companies, ranked by respondent votes and financial performance, included only three financial services firms: JP Morgan Chase (39), Goldman Sachs (45) and HSBC (49). Within the financial services sector, the list of the five most innovative included those three, plus Citi and ING Group.

Goldman Sachs' style of innovation might go out of fashion after the regulators get finished with it. But BTN is happy to note that both US-based retail banks on BCG's "Innovators" list also made ours: Citi for its bold move towards core replacement and JP Morgan Chase for being the first domestic bank to offer an iPad application.

The companies on this year's list were selected based on the degree to which their product or service showcased a promising solution to a vexing problem facing the financial industry: the need for customer centricity, better risk management, consumer demand for next generation retail banking, or increased security.

All of them also offer hope for an industry in need of a makeover, whether it's improving consumer trust through better products and services, regulator trust through better risk management, or investor happiness with the ability to drive new and incremental revenue. The following pages reveal a snapshot of where the industry ought to be going.

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