The Coronavirus is a Forcing Function for Financial Services Innovation
“Some people don’t like change, but you need to embrace change if the alternative is disaster.”
The Coronavirus is having a big impact in financial services, and is going to have an even greater impact on innovation. Why?
Because the Coronavirus has made digital innovations essential to running a business no longer optional. As the deadly virus has grown to pandemic status, the status quo financial services solutions have become obsolete. Old ways of transacting business are no longer feasible. In this environment, customers and businesses need to interact from their homes and businesses without going out in public. Transactions must occur in new and innovative methods (aka digitally). Yet many financial services organizations are not equipped to operate digitally.
The Coronavirus will of course affect everyone due to the drop in the financial markets and shortage of investment capital. But if you look even further inside the inner workings of financial services companies, you will see a disparity in each company’s response and impact based on how their organization has been approaching their strategic innovation. There are a handful of companies that have embraced change to become digital; and a majority of companies that have continued with the status quo, content with small, incremental changes that perpetuated their existing business models.
Those financial services companies that have embraced change through a viable digital innovation strategy will weather this predicament the best. Specifically, they will find themselves the best prepared because they listened to their customers, watched the changing market, and adopted. They are the organizations that have robust innovation programs with people, processes and tools that deploy new solutions. They invested in digital innovation programs that are now functional. Their results developed digital solutions across various platforms, and have non-contact methods for customers to transact business, even during a pandemic.
On the other hand, companies that have not been prioritizing digital innovation will be the least prepared, and will suffer. They may have placed digital innovation on the backburner, or may not have invested in innovation at all. They chose short-term growth preferring old methods over real change and innovation. Their strategies will quickly be exposed for what they were—mere tactics to further the short-term goals of the organization and pad quarterly/annual statements. Their leaders’ lack of real innovation strategy and foresight will become evident because they’ve rested on the same tired tactics such as expanding physical locations, building more brick and mortar stores, and enhancing in-person interactions.
As the Coronavirus continues to impact financial services, it will become a forcing function for true change. Status-quo organizations will have to quickly assess their shortcomings and build solutions to try to stay solvent. During the next few months (in delinquent financial services companies), you can expect to see:
- New internal budget directives that make digitization a top priority, with senior execs appointed to oversee the efforts
- The development and improvement of internal innovation programs
- The establishment of external partnerships designed to leapfrog old legacy systems and processes
- New investments in fintech and venture capital (this won’t occur until after an initial stalling of investments due to market uncertainty)
There are a lot of companies that claim to be innovative, but very few actually are. They have talked a good game of digitization but mostly stayed on the sideline preferring to avoid the risk of change. Now, because of the pandemic, they will be forced to take a more realistic approach towards their innovation in order to survive.
Mick Simonelli built and led the USAA innovation program to best-in-class and now works as a strategic innovation consultant for financial services organizations. Mick also curates “Practical Innovation”, an innovation newsletter with 27K subscribers. He enjoys conducting strategic innovation assessments to assist his clients in developing a practical strategy to quick success.