“The UK banking system is big”
This quote from a recent Bank of England publication perhaps qualifies as one of the understatements of the year. The publication, entitled ‘Why is the UK banking system so big and is that a problem?’ goes on to explain that in 2013 not only did the UK banking system equate to 450% of GDP (compared with 100% in 1975) it is also currently very international and ‘exotic’ in composition.
As a study in the history of the growth of UK banking and of the risk factors arising out of its current dominance in world terms the paper makes interesting reading and the paper does make a strong case for improving resilience within the sector. But whilst the paper concentrates on wider global factors, they are by no means the only influencers on banking stability. Banks may be big and they may be international but they also exist to serve both the public and business. But, to do so effectively in 2015 and beyond will require a complete shake-up of the banking model.
Quite simply, thanks to technological improvements and a changed consumer appetite the model which ‘served’ banks for decades is defunct. Customers no longer want to be told that their bank is ‘serving you’ they want a hand in creating products, which genuinely meet their needs. And if the traditional banks and finance houses don’t step up to the mark then there are plenty waiting in the wings to take their place.
Atom’s (www.atombank.co.uk) recent successful fundraising exercise highlights the appetite within the city for financial services delivered on a digital platform. Devices such as smartphones and tablets, which provide instant access, are driving the public appetite for fast responses and instant access to funds. The FCA may have reined in some of the payday lenders more exuberant moves in recent times but at the same time there was an acknowledgement that in some areas payday lenders were providing the type of streamlined quick decision making that the public were looking for.
But despite the public and businesses appetite for new products delivered digitally there is still reluctance in some quarters to move as swiftly and as radically as is required. True some of the big players in the market are pumping funds into digital platforms but that is a far cry from the adoption of an innovative culture which co-creates products and services which will drive the industry forward over the next decade. As a strategic advisor on innovation I’ve seen at first hand the multiple barriers to innovation that are holding businesses back from making that radical leap forward. Some of these include:
- The regulators won’t approve. Wrong! The FCA launched an innovation hub at the end of October announcing “Our commitment to fostering innovation in the interests of consumers is not a fad. It is now an important part of our regulatory philosophy.”
- There is no public appetite. Wrong! Ofcom reports consistently show how the UK is leading the way globally in digital spending, digital listening and digital interactions.
- The technology isn’t there. Wrong! The new entrants to the marketplace say it is and are all out to steal a march on those who hold back.
- The investors won’t back it. Wrong! The Atom fundraise shows how investors are prepared to fund new models, which will bring future profitability.
The UK banking system may be ‘big’ and it may be underpinned by the weight of history but if it is to continue to grow then it has to adopt an innovation culture which actively seeks to leverage technology in the creation of new services delivered over new platforms. Growth and future competitive advantage is now very much innovation-led and the historic currency of size and legacy has no value in the new innovation driven economy. The reality is, the barriers are illusory; the regulators and customers and investors all want change so what is stopping you?
If you want to find out more about removing innovation barriers and driving growth through innovation perhaps it’s time you got in touch? Feel free to email Cris at firstname.lastname@example.org or browse the website for more information on how The Future Shapers team help some of the world’s smartest companies succeed through innovation.