Banks in emerging markets are more likely to invest in R&D to ensure they become more innovative and deliver enhanced customer value, according to a report from Infosys.
Infosys’ sixth annual Innovation in Retail Banking 2014 report, which was conducted by Efma and surveyed more than 100 global retail banks, indicated that banks in rapidly developing markets display greater ambition for becoming innovation leaders than those in more mature markets. For example, banks in middle-income and relatively high-growth countries – such as Brazil, India, Malaysia, Russia, South Africa and Turkey – are more likely to have an innovation strategy and to invest in R&D.
The study also revealed that banks across the globe, especially those operating in more mature economies, have increased their innovation investments in 2014 to meet customer expectations and respond to new market entrants.
Globally, 84% of banks plan to increase their investment in innovation, while 61% indicated they already have an innovation strategy, a significant increase from 2009 when the figures reached 13% and 37% respectively. In addition, 49% of banks aim to become innovation leaders in their markets and 38% are content to be fast followers.
“In times of continued pressure on profitability, there is no letup in the demand from customers for innovative products and services,” said Michael Reh, senior vice president and global head of Finacle at Infosys. “One interesting finding of this year’s report is that many banks in rapidly growing emerging markets, who are used to generating profits from customers with smaller transaction values, are at the forefront of innovation in retail banking. Lessons on innovation from these banks could be extremely valuable to financial institutions around the world as they compete with new players in the market.”
While banks are increasingly concerned by new competitors, such as established technology companies and telcos, there is increasing collaboration with start-up companies to help drive innovation in banks. Around a quarter of respondents have invested in start-ups.
As part of their innovation strategies, 89% of institutions are focused on improving their consumer channels, while 88% indicated that mobility is one of the main innovation themes. In addition, 67% are focused on improving big data capabilities and 63% on enhancing social channels.
Almost three quarters of survey respondents highlighted that they regard mobile payments and services on multiple devices as highly important for delivering customer value in the mobile channel. For the online channel, automated account origination and personalised marketing offers were highlighted as important by 70% and 59% of banks respectively.
“This year’s global retail banking study indicates more banks are adopting formal innovation practices and developing their approach to open innovation,” said Patrick Desmarès, secretary general at Efma. “However, there are still a large number of banks which do not seem to have good basic practices, so there is plenty of room for improvement. Working closely with start-ups is becoming more common and we believe this is a positive trend. Interestingly, it is the banks in fast growing and rapidly developing markets that are still leading the way and showing more ambition.”
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