When you ask bank IT executives how things are going on the innovation front at their institutions, you'd think they're all from Lake Wobegon, where all the men are good looking and all the children above average. Some 70 percent of bankers surveyed by Accenture said their firms were more innovative than their competitors. (Compare this with the low self esteem in the insurance industry-only 43 percent of those executives said their firms were more innovative than their competitors.)

Another way read that number is that most bank executives know they're spending some money on innovation, but understand that the industry as a whole hasn't pushed the envelope in terms of R&D in recent years. But with the changes in regulations eliminating many sources of fee income, and underlying declines in businesses like mortgages, institutions "are really going to need to roll up their sleeves and figure out how to drive new profit levers, and some of that is going to have to be through innovation," says Terry Moore, Accenture's North American banking lead. "As the saying goes, 'You can't cost cut your way to greatness.'"

The areas most ripe for innovation, Moore says, are credit analysis, risk management, and cost containment. In the channel side of the house, seizing sales opportunity online is key. "You have to look at the digital channel and decide how to turn that from a transaction and customer service capability, which is pretty mature, into a sales engine."

But seizing this kind of opportunity is problematic for many institutions because innovation isn't part of the culture of the company. In the survey, 63 percent of bank executives reported their company is looking for the next "silver bullet" as opposed to developing a portfolio of innovations. That indicates "it's not in the fabric of what they do everyday," Moore says. "It's 'Go find something that will help.'"

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.