In a world where the mantra “fail fast, fail often” is championed, what exactly is an acceptable failure rate for pilot projects in retail financial services? A study conducted on behalf of Pegasystems, Marketforce and Cognizant put this question to 500 retail financial services and insurance industry executives across 56 countries. It also queried if bankers of the future should grow a beard and wear jeans to work (more on that below).
The survey found nearly two thirds of all executives surveyed (61 per cent) felt their governing board would tolerate a maximum failure rate for innovation pilots of only 30 per cent or less, indicating the existence of a deeply-rooted ‘safety-first’ culture within the industry that could hold back innovation.
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“Banks and insurers will have to realise they will need to fail fast and learn quickly if they are to engage with the digital transformation process required to remain competitive,” said Graham Lloyd, director and industry principal of financial services, Pegasystems.
“In my opinion, a 50 per cent failure rate should be the absolute minimum that any of these organisations should be willing to accept if they are to cultivate a successful culture of innovation, as anything lower than this signals a lack of commitment to embracing change. Senior figures within these businesses must take the time to walk in their customers’ shoes and see innovation failures less in terms of cost and more in terms of learnings and savings. Only by opening themselves up to the innovation imperative — along with the associated risks — can the industry avoid being left behind by the new age of digital disruption.”
The report, The Future Of Retail Financial Services, highlighted the idea that institutions have recognised their limitations Many are opting to foster innovation at arm’s-length via hubs and labs — often alongside fintech partners, who have a clear mandate to innovate and think “outside the box”.
The balancing act between innovation and regulatory compliance could well be the defining skill of 21st century financial services leaders, the report said. Ninety-eight per cent of all survey respondents agreed that the most important contributing factor to innovation in retail financial services was the need to move outside of their comfort zone, “think beyond traditional boundaries,” and “identify new ways of meeting consumer needs”.
Where tech bros meet suit-wearing bankers
All the discussion of fintech’s creativity colliding with the scale and reliability of traditional financial services raises the question: what will bankers of the future look like?
According to the survey, 82 per cent of respondents think the financial services leaders of the future are likely to own an Apple Watch and 78 per cent envisage the male of the species sporting a beard. Some things are not changing, however — respondents still think it more likely that the financial services leaders of the future will regularly wear a suit to work (78 per cent) rather than regularly wear jeans (66 per cent).
“One banking executive said ‘fintegration’ is the holy grail for banks — but it does offer a clear route for both parties to drive forward innovation at scale and pace but with a mind to the trusted position of looking after other people’s money and the need to stay compliant,” the report said.