Measure innovation in incremental wins

The financial services industry continues to witness rapid changes and disruptions driven by digital technologies, customer expectations, and new entrants, where innovation is no longer a choice, but a necessity.   

Amy Radin, lead judge of the 2023 BAI Global Innovation Awards and Raghav Agarwal from Infosys join us today on the BAI Banking Strategies podcast. They reveal the innovations — and the habits of good innovators — that can transform financial services organizations and often, whole markets brimming with growth potential. And yet, as this panel and the 2023 winners make clear, innovation doesn’t always have to mean complete disruption. 

A few takeaways from the conversation:  

• In a climate of higher interest rates and continued economic shakeout from the pandemic, the most effective, measurable innovation is gained through incremental steps – in customer experience, omni-channel banking, payments, even risk management.   
• The role of generative AI in banking is at a pivot point in its “hype” cycle. Top of mind? Trust, security, data management, risk insight and smartly using the investment needed to build out AI.  
• Innovators must think about how to scale their concept in the earliest days of ideation. Where is innovation growth most likely in 2024? Embedded finance, hyper-personalization of banking services and continued growth for generative AI. 

Interview transcript:  

Here with me today is Amy Radin, Financial Services Innovation Executive, award-winning author, and lead judge of the 2023 BAI Global Innovation Awards, and Raghav Agarwal, Vice President and Portfolio Head, Strategic Accounts and Financial Services at Infosys, to share recent innovation trends in the financial services industry and how banks can position themselves as leaders focused on customer experience, data, and collaboration.  

They’ll also share some recent examples from the 2023 BAI Global Innovation Award winners and how those standouts leveraged innovation to solve real-world problems and create positive impact.  

Amy and Raghav, welcome to the BAI Banking Strategies podcast. 

Amy Radin: 

Great to be here. Thanks for having me, Holly. 

Raghav Agarwal: 

Thank you, Amy and Holly. Great to be with you here for this podcast. 

So Amy, I’ll start with you. We’re talking about innovation today, both sustaining and disruptive innovations, and no conversation about banking-related innovation is complete without talking about the BAI Global Innovation Awards. The 2023 award winners were announced in October, and as in years past, you were the lead judge for those awards and we thank you so much for serving in that important role. What are some of your high-level takeaways from this year’s program? 

Amy Radin: 

First of all, I have to say I really enjoy being part of this program every year because I get a global view of what’s happening from some of the top banks and fintechs in the world. And a couple of things really stood out for me this year, first of all, the overall quality. It was really hard to choose. Secondly, the breadth that we covered, that the submissions covered in terms of geography. So we had submitters and winners literally from all over the world. So the winners represent the United States, Canada, the UK, South Africa, Spain, India, Turkey, China. So that was very exciting and great to be so inclusive in terms of the winners we have the opportunity to recognize. 

Secondly, it’s just the breadth of innovation. Years ago, people in banking would go automatically when they thought about innovation towards, “Well, I need a new product,” and the winners this year represent a lot of focus in customer experience, which I think is really important, so we’re happy to see that, payments, risk management, and within the submissions, it definitely similarly focused on artificial intelligence, nice range of fintech and established financial institutions. And also really exciting were the stories about the Rising Stars, which we added to the Global Innovation Awards, now this is our second year, where teams and peers are nominating leaders who are really driving the innovation effort in their organizations. And it’s so important to have that leader out in front who is carrying the flag for innovation and really heartwarming to read those stories and see the wonderful people being recognized. 

Raghav, given that Infosys as a market leader in the technology innovation space, you work directly with clients and hear their priorities and concerns firsthand. What trends have you seen over the past year? 

Raghav Agarwal: 

During the pandemic and coming out of it, there are immense business needs for newer technology adoption, transformation, and innovation. Almost all financial services firms are pivoting towards being a technology-driven organizations, which means being nimble, highly efficient, and adopt agile ways of working to address the business needs. Gen AI is the most buzzworthy trend. So I will start there. It is at an inflection point in the “hype” cycle. Many in the financial service industry want to be at the forefront, but not necessarily the earlier adopter. They want to hear about the use cases and success stories from other clients so they can learn from their lessons. 

Still, many are exploring AI-driven personalization to cross-sell and upsell to their clients. As AI technology continues to advance the potential increases for tailor-made experiences. With that, AI trust, risk, and security management is a key priority to ensure financial firms are protecting their investments. They feel confident that, once they develop a sustainable and suitable technology practice and democratize generative AI, they will be able to deliver value with machine customers and an augmented connected workforce. 

Apart from AI, we are seeing a lot of transformation in payments, banking-as-a-service to reach new customers. FS firms are reimagining their digital wallets to make them faster and much more secure. Decentralized finance (DeFi) and advancements are also growing and more investment in API-focused ecosystem to really enhance the power of technology. I also believe that the acceleration of gen AI is also accelerating the ability for banks to put their ESG principles and [inaudible 00:06:27] practice into effect before they can get too far down the line with gen AI. I see the key concerns continues to be around security and protecting customer data. Firms are adopting enhanced biometric security and new technologies to stay ahead. 

And Amy, you mentioned a lot of good trends, different things that you were seeing with the awards this year. It seems that there’s a balance in innovation, including more gradual and realistic improvements, along with some disruptive breakthroughs. And certainly don’t mean to imply that smaller changes are less valuable, because they certainly can be high-impact, but I’m curious, why do you think that innovations have focused even more on the quick implementation wins for customers versus long-term and ambitious projects? 

Amy Radin: 

First of all, you’re always going to have a heavier weighting towards the incremental sustaining innovations. Disruptive, just by definition, don’t come along that often. Clearly, this has been a year where the banking industry worldwide has been dealing with a very unusual interest rate environment, consumers and businesses still recovering from the pandemic. So with that level of uncertainty and ambiguity, it’s just more to be expected that there’ll be more of a push on generating more near-term results, but I want to point out that incremental or sustaining does not need to be small. You can come up with an innovation that can impact your entire customer base, reduce costs, increase revenues, and could be quite meaningful to the business. 

The other thing I think happens is that innovation by definition is new and involves change. And banks, being more conservative organizations, are going to want to understand the connection between the innovation and impact on the business’ financial performance, and frankly, it’s easier to do that with the incremental wins. So my advice has always been, yeah, good idea to focus on a lot of those incremental wins and build a portfolio around those. They not only generate results, but they also help you build credibility with the rest of the organization so that you can then go on to do the bigger, riskier, and longer-term plays. 

Raghav, let’s discuss how the relationship between fintech firms and traditional banks and credit unions has evolved. Fintechs are eager to gain more market share in the banking sector and banks are keen to adopt more technology solutions. Now, you certainly have a clear view of the current landscape. What is your vision for the future of fintech/bank collaboration? Where do you think it’s going to go? 

Raghav Agarwal: 

A very interesting question, and I think a very timely question regarding the fintech and the entire ecosystem of financial service collaboration. See, fintechs are necessary catalysts to financial services transformation and continuous innovation. Yes, banks and fintechs are more collaborative now than ever before. They are creating a win-win model to use the strength of both parties to create ecosystems that deliver a seamless digital banking experience to the customer. Banks can leverage fintechs’ tech stack and emerging technologies while fintech benefits from banks mature algorithm and customer behavioral data that they have built over the decades. And of course, fintech can benefit from more capital, a stamp of trust, and the solid customer base. 

Examples of some of the industry-leading collaborations with the big banks and the fintechs, I will name few. Citi invested in Peruvian foreign exchange firm, Rextie, to enhance their FX offering. JPMC, on the other hand, partnered with BillingPlatform for enterprise revenue life cycle management for their treasury services and trade finances businesses. Amex, a leading player in a card issuer network, teams up with Superlogic for loyalty and connected commerce to provide Amex merchants with next-gen loyalty programs. Even Goldman and BNP Paribas invested in the fintech firm, Fnality, that applies to blockchain for central bank transactions. 

Often, we see banks are investing in fintech to become more competitive against the big tech. By improving the payment capabilities and offerings, they are seeing fintechs as the secret weapon to combat tech giants. So it is very, very important to stay relevant and work collaboratively in the ecosystem with fintech and the big banks. 

Amy, earlier mentioned some of the countries that were represented this year in the awards. And question to both you and Raghav, one thing that stands out to me about the BAI Global Innovation Awards is the increasing number of submissions and winners from abroad, and especially with smaller niche innovations to support developing economies.  

I’m curious to hear from both of you, what do you think are the factors that motivate innovation in those regions, especially in the countries where the banking infrastructure is less advanced than it is in North America, Europe, or Japan?  

Amy, would you like to start? 

Sure. Well, one of my favorite submissions and winners of all is the award to mooPay in India, supporting farmers. India is a huge market with one of the world’s largest populations and a lot of underdeveloped infrastructure. I think it’s really smart to start with a very focused segment, as mooPay has done, and I proofed the concept and start to build the business in that segment. It’s not hard to believe that they won’t find other segments to then expand to and also serve. 

But when you have a market like India with very large populations, so large potential and underdeveloped infrastructure, in some ways, it’s easier because you’re not replacing legacy infrastructure. I know there are many other challenges, so I don’t want to trivialize the challenge of launching new technologies in a market like India, but just being able to use the mobile phone infrastructure to deliver banking services is a very exciting opportunity that has been slower to realize in a mature market like the United States. So not surprising and I think a great strategy for that kind of market. 

Raghav Agarwal: 

Again, a very interesting questions and very, very relevant of our time. I will add a unique perspective. As Infosys, we work across the globe. What we see that in developing our new age economies, they don’t have legacy or a tech debt. So the speed of innovation and willingness to address the local country or the regional needs is very motivating and gratifying. 

For example, as of 2023, India is now the most populous country in the world with dynamic and young workforce. I think that, the next year, we will continue to see India as a role model for less advanced countries capitalizing on the opportunities and even to some developed countries on a specific use cases like digital mass payments and banking for the unbanked. The India tech stack through digital public infrastructure is a great example of how typically a less advanced countries customize technology for their needs. Account aggregators and UPI usage is transforming both lending and payment in the way that all financial institutions globally will have to compete with. So the motivation comes from the agility and the desire to make a change. 

Raghav, based on what we’ve seen in the Awards this year, a major goal of banks and credit unions in their digital banking efforts is to further improve and streamline the customer experience, which means delivering a more tailored and efficient experience for the customer, not just digitally, but through an omnichannel approach.  

Would love to get some insights from you here in terms of how do you assess the progress of U.S. banks in reaching their desired level of transformation in this area, and what do you think are the challenges and opportunities for them to get where they aspire to be? 

Raghav Agarwal: 

See, the banks goes through the cycle of change, investment, reinvestment, and prioritization. This year has been an especially challenging year for the banks as they reevaluate their priorities. While budgets are tight, they are well-aware of the need to accelerate their digital transformation to achieve their goals. Right now, we are seeing a lot of cost efficiencies and optimization stand out as the investment priority, but they know they can’t cut corners on customer experience and expectations. Aside from fintech collaboration, banks are exploring various partnerships and alliances to reimagine the current financial services ecosystem. Banks are modernizing, so they can add capabilities, such as base offering and the use of open banking APIs, for integration of fintech solution from external partners. 

So, to close us out, Amy, you’re a former chief innovation officer, you work with a lot of innovators and financial services organizations, what advice would you have for innovators who are looking to do more of this important work? 

Amy Radin: 

My heart goes out to all the fellow innovators of the world. It’s hard work, but so rewarding. So here’s my advice. Number one, make sure you build the analytics partnerships internally so that you have the support to connect the dots between your concepts and impact on the business, whether short-term or long-term. The sooner you’re able to help your CFO and the other key decision makers understand the business impact of where you’re heading, the easier it will be to garner support. So build those analytics partnerships. They’re really important. 

The second thing is, if you want to be in a position where you actually can scale the impact of innovation on the business, you have to start thinking not just about the specific concepts that you want to test, but how do you get the organization ready to help you scale? So, is there skill building that has to happen around the organization? Are there capabilities that have to be put in place to enable your innovations to happen at scale? Are there processes that need to change? So think about scale because, if you continue to focus on one experiment, one new concept at a time, and you don’t focus on the bigger requirements to create scale, it’s going to be harder for your colleagues to appreciate the impact that innovation can have on your organization. 

So, you both have shared a lot of really great insights and information today. As we conclude our discussion, love to look ahead and talk about some predictions for 2024. What banking-related trends do you think will gain more momentum and attention in the coming year? Raghav, what are your thoughts? 

Raghav Agarwal: 

From the banking-related trends, what I see is that we will see a lot of emergence of embedded finance as a crossover of connected banking offering with hyper-personalization. I also think we are only witnessing the beginning of gen AI adoption and investments. As more use cases start being shared publicly, we all be able to dream even bigger about the potential. Whether it will be fraud detection and prevention in real time, customer service, personalized product recommendation, risk assessment, credit underwriting, portfolio management, cyber, trade finance, to name the few, and even recruitment, we will start to understand all the ways it can make everyone’s job easier and better as we speak. And for banks, that’s really going to help them to be more efficient that they can be while delivering superior customer experiences. 

That’s great. Amy, Raghav, such good advice, I think some very wise words for our audience today. Thank you so much for being on the BAI Banking Strategies podcast. 

Amy Radin: 

Great to be here. Thanks again for having me, Holly. 

Raghav Agarwal: 

Thank you once again, Amy and Holly, for asking some very relevant questions and sharing some of the insights from Amy. I learned a lot. Thank you once again for having me here.