Technology is turning the traditional banking sector on its head. As a result, banks are increasingly looking to both their clients and fintechs to collectively develop new products that will better fit client needs.
Clients themselves are far more demanding these days – vanilla solutions are less and less accepted. “Clients want to see their banking partners take the initiative,” said Paul Skelton, Head of Global Banking at Standard Chartered. To stay relevant in an increasingly-digital world, banks have to work beyond their silos, he urged.
And it’s not just the digital prowess of fintechs that banks need to welcome in to their product-development processes. Clients themselves have access to more information than ever – enabling them with greater acumen to self-diagnose their needs. “Two heads are better than one. Three heads are even better,” added Skelton. “We believe such multi-collaboration will become the future standard within financial services.”
This process of co-creation marks a shift away from the traditional product development model where sales/marketing departments conduct market research, which is then handed to engineers to build a solution.
“The risk of the traditional approach is that products may not be fit for market requirements – but by the time this becomes apparent, money has been spent, time has lapsed and individuals and egos involved refuse to admit failure, so the products are pushed anyway,” said Alex Manson, Global Head of Standard Chartered’s innovation lab, SC Ventures.
One new approach consists of testing a small version of the product very early on with customers, getting feedback, iterating the prototype and getting more feedback. Further iterations would continue as many times as it takes to generate a product where confidence levels over client adoption is much higher than the traditional model.
In practice, the approach requires ongoing involvement from clients – either a single large client or a representative sample – in the form of structured workshops, for instance. “Only once the concept is proven would we go through a production environment at scale,” said Manson.
Banks have moved on from regarding fintechs as competitors – and instead recognise the benefits of their new approaches to solving client problems. As such, fintechs are increasingly involved as a third contributor in the co-creation process.
An example of a recent such project is the partnership between Standard Chartered, Siemens Financial Services and fintech TradeIX. Together, they created an industry-first client pilot of a blockchain-based smart guarantees proposition for trade finance.
According to McKinsey, for companies that figure out how to co-create well, the rewards can be far greater than a more effective and efficient R&D organization. More important, it is a core capability for unleashing the vast ingenuity of outsiders on an organisation’s biggest challenges.
A good example of co-creation unleashing collaborative potential was the recent e-Payments Challenge hosted by Worldline, a market leader in payment and transaction services in Europe.
The challenge was a unique ‘hackathon’ that speeds up the innovation-to-business cycle.
Commenting on the hackathon, the Deputy CEO of Worldline, Marc-Henri Desportes, spoke about how most of the solutions that emerged from the intense collaboration between startups, clients and internal experts “are much more than creative ideas: they deliver clear solutions with full implementation potential.”
Ultimately, the optimum results from co-creation are derived as a result of diversity – where multidisciplinary skill sets from a diverse group of people come together to create something unique. But for banking solutions, it’s still crucial that bankers remain involved in the process, said Manson.
“Bankers are crucial to ground things. Excluding them was a mistake that a lot of the labs with design thinkers and technologists made initially, which wasn’t grounded on commercial sense,” he said.
To Manson, these projects are about changing the way banks operate as they adapt for the future – via new ways of thinking and new business models.
“It’s not really about technology. Technology is always present, and we use it all the time, but it’s about rewiring banks’ DNA,” he said.
This article was also published in Bankable Insights, Edition 12