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With the recovery in macro economy, banks across the globe are increasing their spending on innovation in an attempt to generate more revenue and save costs, an annual study by Infosys and Efma on Monday said. Efma is a not-for-profit organisation that has over 3,300 retail financial service companies from over 130 countries as its members.
According to the Innovation in Retail Banking 2013 study, which is commissioned by Infosys and conducted by Efma, 60% of the banks surveyed this year have an innovation strategy compared to just 37% five years ago, when the report was first issued. The study covered 148 banks across 66 countries this time.
This study also showed that 77% of the banks surveyed are increasing investment in innovation, as against only 13% in 2009.
“There are multiple factors driving banks to invest in an ‘innovation strategy.’ Some of the significant ones include non-traditional competition (from web-portals/search engines, telcos, retailers and insurance companies); changing regulatory landscape; demanding customers; technological evolutions including Cloud, Mobility, Social and Analytics; and investors’ expectations,” Rajashekara V. Maiya, associate vice president and lead product manager, Finacle at Infosy told Business Standard.
Banking industry is the largest revenue earner for most Indian information technology (IT) players.
The study showed that large and medium sized banks rate legacy information technology (IT) systems as one of the top three barriers to innovation. This, Maiya believes, is an opportunity for the IT companies.
“IT companies can help banks become more innovative and transform their IT systems,” Maiya said. “In the report, banks also mention that ‘effectiveness of open innovation at banks’ is successful when it involves a partnership with IT companies (score of 4.2-the highest on a scale of 1 to 7.”
Some of the key areas where IT companies can help banks in their journey of innovation. Maiya said, include consulting around channel innovation, product innovation and process innovation, he added.
On a geographical basis, the study said, Europe remains to lag peers in terms of investments in innovation, “reflecting the general economic conditions and growth challenges”.
