Who isn't wary of the word "innovation"? It's everywhere and of course, the more people use it, the less it means. Yet the ability to adopt new technology and accommodate changing customer preferences is a true survival skill.
Jeff Carter, former executive at MIT's Center for Future Banking, says banks need to "lethally innovate," meaning look at a completely different business model to go after revenue in a different way because their core business is under threat. "It's impossible for companies to innovate lethally because they'll kill off certain participants or destroy the profit streams they had," he says.
Carter's hypothesis is that companies need to lethally innovate across industries. For instance, banks are afraid of Google's efforts to get into payments. "There's no innovation a bank could do that would present a barrier to Google," he says. "But if the banking industry attacked Google's core business, that's a different play because now you can unleash the brightest minds within your company or industry without hurting your existing business."
One way banks could attack Google, Carter suggests, is by selling customers their own data. "Banks have the most important data on the planet," he notes. They possess virtually all information about consumer purchases, travel and lifestyle "because how you spend is how you live," he points out. Banks could sell a feed of airline ticket prices, for instance, such that a customer could be guaranteed to get the best ticket price at the time of purchase. "That's a value prop on a street level, something that Google could never do," Carter says. "It's something that no one can do save the airlines and they're broke. Yet the banks have that information."
It's an interesting idea that would raise a raft of regulatory and security issues for banks. Carter's new company, Hoyos Technology (he's chief business development officer), makes an iris scanner that identifies people by capturing and matching more than 2,000 points in their retina to a database, Minority Report-style (however, the company founders are quick to point out that their technology tests for "liveness," so that you couldn't steal someone else's eyeball and therefore their identity).
On the less-lethal side of innovation, at the Finovate show in May, entrepreneurs demonstrated 30 new financial technology products a day, mostly consumer facing, to an attentive audience of bankers and venture capitalists. Spirits where high and many good ideas were shown. The products ran a gamut from electronic coupons to online ads that link to payment cards to online investing to tablet-based loans to security devices including Hoyos' scanner.
But a few of the ideas made me scratch my head. Even if banks could get into the business of selling electronic coupons, linking ads to payment cards or selling customer data, should they? Or could they confuse customers and appear desperate for fee income?
Penny Crosman
Editor-in-Chief
