Technology can offer solutions to many economic problems. But what challenges are there for banks looking to bolster their tech expertise? Paul Stallard looks at how banks can embrace innovation.
Innovation is the most effective means of addressing economic instability. In today’s globalised world, economic instability can have far-reaching effects, from job losses to widespread social unrest. Innovation can help by creating new economic opportunities. For example, the rise of the gig economy and the increasing use of automation and artificial intelligence are all innovative solutions that have created new jobs and driven economic growth.
The two biggest challenges for innovation in banking
Innovation does not come without its challenges. Two of the biggest challenges today are the shortage of technical talent and the need for investment.
Developing innovative solutions requires significant investment, in terms of both time and money. UK banks are expected to invest £11bn in technology during 2023 rising to £14bn in 2026.
That level of investment could be much higher but there is a reluctance among some investors to back innovative solutions due to the uncertainties involved. There is no guarantee that an innovative solution will succeed, and the risk of failure can be high.
However, if the problem of insufficient tech talent is not addressed, investors are unlikely to increase their commitments, as is often required, and could potentially be deterred from investing at all in future.
Other reasons why innovation might not be working
Since Covid-19 the demand for tech talent has increased exponentially. The pandemic created a much higher level of attrition which, in turn, has created a super-competitive market for tech professionals.
However, a slowing in the level of innovation cannot be blamed exclusively on a shortage of tech talent. In 75% of cases most innovations fail because there is poor alignment between the proposed offer and the actual needs of the market. In other words, the business is making products it thinks customers want rather than actually finding out exactly what it is they want. Firms who create products for consumers should be closer to their customers than anyone else in their business.
That said there are several other classic reasons why some businesses are to be found wanting in the field of innovation.
- Money – budget restrictions mean firms are unable to afford the investment required.
- Leadership – poor leadership can result in a lack of motivation to innovate.
- Planning – complete absence of long, medium, and short-term planning means new projects are unlikely to be successful.
- Change – a fear of failure can stifle innovation.
- Culture – lack of innovative mindset and technological eco-system means firms are unlikely to develop new ideas.
Shortcomings in one or more of these areas can have serious consequences for a banks’ prospects and create a difficult working environment for tech professionals.
Every organisation looking to safeguard its talent, its future, and the favour of its many stakeholders, must look to address and excel in each of the areas listed to create an environment in which innovation can flourish.
How can banks support their tech talent?
Understandably most banks have been addressing the tech talent problem. First and foremost, they are concentrating on retaining their existing talent. In addition to maintaining continuity in the development of technical solutions, focusing on the retention of existing talent should improve the image and reputation of the bank as the place to work. Top talent will always be attracted to stellar brands. Keeping existing tech talent is not a complex process and typically involves:
- enriching roles and expertise · creating on-going learning and development opportunities
- recognising, rewarding, and acknowledging efforts through promotion
- investing in the latest technological tools
- wholeheartedly embracing diversity, flexibility and understanding.
Innovation requires effective leadership and collaboration
Another no less important challenge to successful innovation is the increasing need for higher levels of third-party collaboration. Much of the innovation we see today requires in depth collaboration between individuals and organisations from different fields and disciplines. This can be challenging because different organisations may have different goals and priorities. Finding common ground and working towards a shared vision can be difficult, but it is essential for successful innovation and requires crystal clear leadership.
Innovation that doesn’t consider the real needs of customers is costly and opens the door to competitors. To prevent loss of business, everyone in a banking organisation must have a first-hand understanding of customer requirements.
Despite these challenges, innovation remains the only solution to a better world. We must continue to invest in innovative solutions, collaborate with others, and take risks. The benefits of innovation far outweigh the risks, and the potential rewards are too great to ignore. By working together and embracing innovation, we can create a better world for ourselves and future generations.
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