The people have spoken. The future of banking is mobile and cashless, or at least “mostly cashless.”

That’s according to Bank Innovation’s annual State of Banking Innovation survey for 2018. 146 respondents, 55% of whom identified themselves as employees of financial institutions, completed the survey in June 2018. 

Respondents working at banks, credit unions and finance companies say the three major areas of innovation their firms are putting their money this year are mobile banking, online banking and core banking.

Spending on payments and APIs/open banking doesn’t appear to be far behind. Analytics and bots/artificial intelligence are certainly on the radar as well, but not so much as primary items, as illustrated below. For this questions, bankers were asked to select their top three innovation areas by spending.

Notably absent from the spending list was blockchain and cryptocurrency, with just one respondent of 48 listing blockchain as a secondary item. However, three respondents identified blockchain as the most valuable area of innovation to consumers today.

Overall, the areas of innovation that respondents say are most valuable to their customers are also the areas where their companies are directing their innovation dollars this year. For instance, mobile banking was ranked the most important (by far) and is at the top of the spending list (by far). The most notable disparity was with payments, which ranked second in importance to customers but fourth in terms of spending.

Of seven common impediments to innovation, budgets, corporate bureaucracy and regulation/compliance were identified as the biggest culprits.

About 56% said their company does not invest in startups, compared with about 33% who said their company does. Another 10% or so said they were not sure. Of those who said their company does not invest in startups only about half said there are plans to do so in the future.

Respondents gave their company’s innovation team a weighted average of just 2.85 stars out of 5. 

Comments indicated there is “no such team,” or that their innovation team is “just getting off the ground in 2018” or “still on its way.” One respondent even commented, “it’s just me.”

Asked to assess the overall state of banking innovation in the industry today, many respondents said in one way or another that banks are stuck in their ways and not innovating rapidly enough. Others said too much thought is put into gadgets, gimmicks or “special effects” and that “real” innovation will be facilitating “frictionless banking” or building a “seamless experience” for customers. One said innovation was, simply, “satisfactory.”

On a scale of 1 to 5, with 1 being not innovative and 5 being most innovative, about 41% of respondents gave the industry a 3 for innovation overall. Less than 7% gave the industry a 5.

Asked to describe what banking will look like in 2028, respondents indicated they are already envisioning a cashless (or “mostly cashless”) future with services aided greatly by artificial intelligence. One predicted a rewards-heavy future due to intensified competition in the industry. Another went so far as to say banking will be “an experience, not a company.”

The fintech folks have also spoken.

Six of 10 respondents said they are currently working with a financial institution. Results were skewed as to how they rate their experience working with those institutions.

As one comment said, “Banks are always slow.” On the other hand, another respondent said their company has a “solid reputation” when it comes to innovation with financial institutions.

Respondent’s startups were at various stages, including product development, beta and fully-launched.

Asked what impediments fintechs have encountered working with banks, respondents lamented over the “slow” speed at which many financial firms move toward innovation. “The regulatory environment and job security prevents them from taking any risk,” one comment said.

Another said financial institutions, core vendors and regulators alike “over-emphasize” a perceived risk in working with younger fintech firms.

Assessing the overall state of baking innovation today, respondents said fintechs are doing the heavy lifting. “Most is Innovation Theater,” one said. “Many banks are browsing what’s happening. Very few are working with startups or otherwise innovating.”

Others said innovation is alive and well in Asia and Europe but not so much in the U.S.

Asked to describe what banking will be like ten years from now, respondents said the future is digital, mobile, instant, and cashless (or, again, “mostly cashless”).