• If you can’t innovate from within, partner with others. The secret to great innovation is that it does not require radical change. Truly great innovations often took place through either a series of baby steps to a goal or a combination of smaller innovations. The iPod, for instance, was not an innovation at all. Akio Morita of Sony had invented the portable music player two decades before the iPod was introduced, and music downloads had been offered by Napster for more than five years. And touch screens? Apple didn’t introduce those until 2007 with the iPhone, but Citibank had touch-screen ATMs in the 1980s. The “innovation” was in pulling all these capabilities together in a way that was relevant to the consumer, and most importantly, easy to use.
Partnering with small technology firms can be a great way to deliver innovation rapidly. Your innovation doesn’t have to be too far out on the leading edge, if you remember the core needs of banking customers. At Citibank, we partnered with outside firms to deliver our award-winning capability for instant account opening, and to be the first in the country to deliver a downloadable mobile banking app. Of course, innovations like these must be developed in close collaboration with your chief technology officer and the external partner, and everyone involved needs to understand the business objectives. (It helps, too, to be bullheaded, because you will be surrounded by doubters and naysayers, above and below, particularly if you are ahead of the curve.)
We don’t know who the most successful financial-services providers will be in, say, 2020, but we can guess that among them will be some that do not exist (or barely exist) in 2013. Powerful disrupters have entered the financial-services fray. Walmart has reloadable prepaid offerings that act like checking accounts. PayPal is enabling payments outside the banking system. Isis provides deposit accounts with payments facilitated through mobile phones. Mint delivers free automated financial advice over the Internet. Lending Tree disintermediates conventional lending, eliminating much of the hassle. Covestor links individual investors with portfolio managers who meet their investment needs. Each of these disruptions has already begun to dismantle part of the traditional financial-services value chain. Today’s banks need to act now— to head off the competitive forces that are coming from every angle, and to become disruptive forces, on behalf of their consumers, in their own right.
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- Catherine Palmieri is a writer, entrepreneur, and consultant in the Internet and mobile financial-services field. Her experience includes launching small business and brokerage capabilities for American Express, online banking (Citibank Direct) and mobile banking (CitiMobile) for Citibank, mobile payments for CashEdge (Popmoney), and banking for TIAA-CREF (TIAA Direct). She is writing a book on digital financial-service strategies, from which this article is adapted.