Why Tech Innovation Should Be the Top Priority for Banks

As a bank owner, you need to budget carefully, juggling all your priorities in a delicate balancing act. But most bank and financial institution owners benefit from making tech innovation their top priority (aside from maintaining functional operations).

Why is this the case? How can you make technological innovation your top priority? And what’s the most practical way to execute this objective?

The Value of Innovation for the Banking Industry

Budgeting for innovation can mean many things. It could mean spending money on new devices, pieces of equipment, and software platforms that enable your organization to do more things. It could mean inventing new products and services that help you serve your financial customers in dynamic, more technologically advanced ways. It could also mean spending more money on research and development, so you can engineer your own internal and external solutions.

In all of these applications and more, the value of innovation manifests in several different ways:

·       Higher efficiency. One of the most obvious benefits of new technological innovation is higher efficiency. Automation is one of the best examples of this; through automation, you can make a formerly manual process more consistent and faster. And in many cases, you can eliminate the need for manual processing altogether. At higher levels, a small investment in automation can help you completely eliminate the need for human resources, freeing up those resources to focus on more important work. Overall, with better technology, your business will be able to get more done and operate in a more streamlined way.

·       Lower costs (long term). Though the initial investment in your new technology could potentially strain your budget, the end result of most new technologies is lower costs. Your business will be able to generate revenue in new ways, operate more efficiently, become less reliant on manual effort, and even reduce risk in some cases. Accordingly, you’ll need to spend far less money on overhead and core operations, ultimately increasing profitability.

·       Competitive differentiation (and dominance). Competitive differentiation is important for several reasons. It helps your bank stand out in the highly competitive financial industry. It gives you something important to serve at the center of your marketing and advertising campaigns. It also helps you present a unique value proposition, so you can win more customers. Investing enough in your technological innovation helps set you apart from your peers.

·       More products and services. Many banks invest in technological innovation so they can offer more and better, more innovative products and services to their customers. Your new invention doesn’t just help your business operating more efficiently, it could represent an entirely new revenue stream for the business.

·       More customers. In line with this, better technology can help you win more customers. Not only are you going to make better appeals to your existing target audience, but you could leverage your new technology to reach entirely new audiences. And because your business is competitively differentiated and seemingly more advanced than your competitors, customers on the fence about their decision will lean toward getting their financial products from you.

·       Competitive defense. Keep in mind that you’re not the only bank considering technological innovation investments. Your competitors are probably actively investing in new technology as a high priority already. In some ways, practicing your own technological innovation investment it’s just a way of keeping pace, so you don’t fall behind your top competitors.

How to Budget for Innovation

Despite being so important, many businesses don’t budget for innovation at all. This is partially due to people underestimating the value of innovation – but it’s also because some business owners in the financial industry (especially owners of small- to mid-sized businesses) don’t realize how to make this kind of investment.

There are several options, depending on your budget and goals:

·       Hire more talented engineers. If you’re interested in building solutions for your own organization, or if you want to build better tools for your customers, consider hiring more talented engineers. Experienced and entrepreneurially minded human resources could be exactly what you need.

·       Research, evaluate, and add more innovative tools. Read about the latest developments in new technologies that are relevant to your business, and be prepared to invest in at least some of them. It’s advantageous to be early in the adoption curve.

·       Take more risks in experimentation. Don’t be afraid to experiment. Some of the best new innovative ideas come as a result of an experiment or trial run that no one thought would work.

Ongoing Tech Development

Technology innovation isn’t a one-time investment, because technology is constantly evolving. If you want your bank to be in the best competitive position, and capable of winning and keeping more customers, it’s important to pursue ongoing technological development.

Always be on the lookout for new tech solutions, and don’t be afraid to invest in your own business’s innovative capacity.