Expert: U.S. banks are falling behind on innovation
2010-06-25
While financial institutions in the U.S. have been quick to adopt new technologies such as online banking, in an interview with American Banker, financial services consultant Brett King recently said that American banks are "years" behind the rest of the world in using those technologies to their full potential to better engage their customers.

King says that one of the most striking places where banks have shown a lack of innovation is in the online banking realm. Most banks - with very few exceptions - view internet banking purely from a cost-savings perspective and don't take into account the customer insights they can learn from it.

"They don't see Internet banking as a tool for creating a dialogue with a customer or a real revenue channel, particularly within Net banking. So as a result you don't see very mature systems in place, particularly for leveraging an existing relationship with customers, in that very private, secure environment, where customers feel very happy engaging with the bank," King told the paper.

Other countries, King says, have done a much better job engaging their customers and creating customer loyalty in banking. Companies in Sweden and Finland are leading the way in mobile technologies, while countries such as Korea and Japan are "five years ahead of the U.S." in taking advantage of things such as contactless payments.

Overall, King says that customer behaviors are rapidly changing, and those changes are having the effect of distancing customers from the banks themselves. As customers increasingly turn to companies such as PayPal and social lending networks, King says that banks become little more than financial middle-men that allow transactions to take place.

To keep themselves from falling even further behind, financial institutions need to become "extremely innovative and very aggressive from this point on." If banks continue to be slow to adopt new technologies and take advantage of new ways to connect with the consumer, King says they could be left behind permanently as other companies take firm control of customer interaction and engagement.

Perhaps compounding the lack of customer interaction is the fact that many financial institutions already think they are doing an excellent job in creating innovation. A recent Accenture survey of bank executives found that 70 percent of them believed their company was more innovative than the competition. Because it's impossible for all of them to be correct, many could soon be left behind.

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