Major European banks have recently been ramping up efforts to tap their existing staff pools to generate ideas for new fintech products and services, amid a broader push among banks to update their corporate culture.
Last month, BNP Paribas launched its Alpha program, and this week, Societe Generale followed suit with what it calls an “intrapreneurship” program. Both initiatives encourage the banks’ existing employees to submit ideas in areas such as data analysis, digital banking, automation, artificial intelligence (AI), and the sharing economy.
Successful pitches are developed in what the banks call a “startup-like” environment, enabling the projects to be re-evaluated constantly to make improvements. In BNP Paribas’ case, the projects will take place in a dedicated coworking space. Meeting changing customer expectations, and staying relevant in an increasingly digital economy, were cited as key motivations by both banks.
This inward-looking approach to innovation has both pros and cons for banks:
- It ensures innovation comes from within the organization. On one hand, this strategy makes the best use possible of any undiscovered creative talent in the bank’s current staff pool, at a time when fintech talent is in high demand and short supply. Most importantly, it can promote cultural transformation by pushing the company’s internal mindset and approach to innovation to become more agile and experimental, allowing the bank to move more quickly in a competitive market. However, for this work ethic to disseminate through the organization, the banks will have to ensure constant interaction between their dedicated project units and the rest of the firm.
- It also risks creating an echo-chamber. By asking for input only from people who have already absorbed a big corporation’s arguably more conservative work ethic, this inward-looking approach risks promoting an environment in which employees don’t imbibe different ways of thinking from external partners — for example, fintechs — as they would do if the bank were developing a product in tandem with an external startup. There is evidence that indicates big banks find it hard to get into a startup mindset, so the firms should be especially wary of this risk.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has written a detailed report on banking culture transformations that looks at where, and how, failure to consider the impact of operating culture can harm banks’ innovation efforts, and includes case studies from three major global banks that are tackling the problem. The case studies examine the approaches the banks are taking in addressing cultural barriers to innovation, details where they’ve seen success, and provides lessons learned. BI Intelligence also details our recommended best practices for encouraging cultural change in banking to better foster successful innovation efforts.
Here are some of the key takeaways from the report:
- A failure to consider operating culture is already hurting banks’ innovation projects. Just 17% of the industry majority have managed to launch five or more digitally driven products since the start of their innovation efforts, and only 16% have implemented five or more digital mid- or back-office solutions.
- Banks are also struggling to acquire the talent they need for innovation projects, and to work effectively with their fintech partners — 55% of fintechs say differences in management and culture are a challenge when working with incumbents, and 40% of FIs agree.
- A few banks managed to identify the problems posed by their operating culture early on, started to implement changes to combat it, and are already seeing positive results.
- Citi, DBS, and ING are viewed as leaders when it comes to innovation in banking. We spoke to all three to find out what’s worked, and what hasn’t, when it comes to creating a culture that promotes innovation. Their insights are compiled into a set of case studies in this report.
- Based on our conversations, BII has put together a list of best practices banks should adopt in order to update their operating cultures including changing up organizational structures, adopting new design processes, rethinking how employees are incentivized, introducing nontraditional work environments, and ring-fencing resources for innovation.
In full, the report:
- Outlines the issues banks face if they fail to update their operating cultures.
- Provides detailed case studies of three major banks that have successfully changed their cultures.
- Gives BI Intelligence’s recommendations for best practices in creating a culture primed for innovation.
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