Banks have a reputation for being innovation laggards. The generally accepted reasons are – scale and complexity of operations, regulatory bindings, and not much first mover advantage because innovations are quickly copied. But, innovate they must, in order to stay in the game in increasingly tough conditions. 

When we asked 59 Asia-Pacific banks across 14 countries what their top barriers to innovation were, we got unexpected results. Across North, South and Southeast Asia, the biggest obstacles to innovation stemmed from communication and cultural issues. Managing the interface between business and IT was the biggest roadblock; the attitude of employees and managers was another sticky issue. Unlike the banks in the West, these had no major technology headaches owing to the recent wave of systems modernisation in Asia and an openness and affinity for new technology. And surprisingly, regulatory compliance was virtually a non-issue, being voted the least important barrier by South East Asian and South Asian banks and ranked somewhere in the middle by respondents from North Asia.

It is logical, that in order to become more innovative banks must first dismantle the barriers. OCBC Singapore addresses the issue of improving communication between IT and business teams by deputing IT personnel to work in various lines of business for as long as a year, during which time they develop a keener understanding of business issues and a rapport with those on the other side. Others are known to do the opposite. Either way, the goal is to get business expectations and IT deliverables to converge.

Nearly 2 in 3 survey participants said that their bank was trying to improve communication between departments.  But top management involvement is essential to set at rest any apprehensions of job loss and also to facilitate adjustment to change. In that light, banks that frequently reshuffle their top layers don’t do themselves any favours. Business continuity is a prerequisite for high quality innovation.

Although technology is less of a worry, it is important to extract maximum value from any older systems by designing processes and tools to circumvent their limitations, since it is obviously not feasible to replace systems at will.  In fact, the capabilities of most systems are underutilised. Smartness lies in anticipating when existing technology could become a hindrance to future business, and building infrastructure and optimal processes in time to beat those issues.

Then we see many banks getting around their budget constraints by not innovating at all on their own, and merely copying those who do. I don’t think that’s the mark of a bank destined for leadership.