At SWIFT’s SIBOS show four years ago, Heidi Miller of JPMorgan delivered a keynote address that asked: why are so many innovations in this business pioneered by non-banks? She might have been predicting the next wave of banking – innovation is now the focus for many discussions with banks.
Banks are trying to work out whether innovation is a process, a science, a quirk or a revolution. In the annual reports of the top 10 US banks, the use of the word innovation has doubled in frequency since 2001 to an average 6.5 appearances per report these days. Almost every bank has a head of innovation, tasked with finding out how to make the bank a ‘thought leader’, ‘differentiated from the pack’ and ‘clearly on the leading-edge’. These heads of innovation try to stir up the executive with new ideas; and yet how many serious innovations are there and how many have come from inside the industry?
This was a question posed recently by a research colleague who asked a global panel of payments experts, including myself, about our views on innovation. Here are the results:
The panel said that Europe’s single euro payments area (Sepa) programme will reduce innovation. That is because in the short-term innovation suffers as technology investments are focused on the modernisation of legacy infrastructures.
The survey asked several other questions, including:
But the most interesting one was whether the panel could name any firms that would lead innovation on payments. The firms named were: Amazon, Apple, First Data, Google, MasterCard, PayPal, Tencent QQ and Visa. Nearly all of these, apart from the shared payments processors, are brand new businesses that are not in financial services.
