Investment Priorities to Prepare for the Future of Banking – Part III

In recent weeks we shared a number of investment priorities that banking leaders must embrace to prepare for the future of the industry. You can read our previous thoughts on the topic here, and here.

There are 3 strategic imperatives that banks must incorporate to remain “indispensable providers” to their customers:

• Develop both banking and non-banking value propositions
• Deliver a world-class client experience across all ways of working – live, virtual, and hybrid
• Build breakthrough innovation capabilities

Across these three broad areas, banks must adopt seven more specific investment priorities to maintain primacy with clients. We previously shared the first five of those priorities, namely:

• Build API architecture
• Develop specialized payments capabilities
• Focus on sustainability strategy and offerings
• Understand crypto regulatory scenarios
• Deliver a contextualized client experience across all channels

The final two priorities are crucial to enable banks to adopt a truly breakthrough posture toward innovation. To keep pace with market dynamics, technology, customers, and competitors, banks must change how they innovate. “Fast following” is no longer fast enough. Building genuine breakthrough innovation capabilities requires banks to embrace two new investment priorities:

• Look for Soft Skills when Sourcing Talent – engaging in breakthrough innovation requires a bank to have the right talent in the right places. But in the new talent landscape, sourcing and engaging great talent is a difficult task for banks. To broaden the front end of the talent funnel, banking leaders should change their search criteria to look for employees with the right soft skills, rather than a STEM background or industry experience alone. Employees with key competencies such as the ability to embrace risk, change, and new ways of working are significantly more likely to help banks achieve their innovation and transformation objectives.
• Develop the Partnership Playbook – as banks mobilize to support much more of the customer journey than in the past, they will develop an extensive array of new offerings. This necessarily means more partnerships as banks lack the time and resources to build entire new capability sets from scratch. Banks must build their playbook for successful partnerships, including partner evaluation criteria and processes to overcome technology, security, and culture gaps. But banks must also rethink their overall partnership philosophy. Historically, banks typically built new offerings internally and only partnered when necessary. This approach must flip. In the future banks will partner as a rule and only build internally if no suitable partner exists. This is the only way to innovate at market pace.

As a reminder, please review our initial two posts on the future of banking here, and here. We also encourage you to access our related research on talent and partnerships. For ideas on how to keep financial services leaders ahead of market disruption, take a look at Techniques to Challenge Stale Assumptions. For more support to prepare for the future of banking, please schedule an inquiry with our experts to discuss how Gartner can help.