„Banks are inherently not innovative.“

Dear reader Banking has almost become a synonym for turmoill during the last four years. And allthou

Dear reader

Banking has almost become a synonym for turmoill during the last four years. And allthough we all look with a certain scepticism and distrust at the banking world, nobody would seriously question the necessity of a vital and competitive banking system for the world’s economy.

The turbulances in the financial markets have shown more than ever before that even banks must remain highly competitive. Managing funds may look like a commodity, but it isn’t.

What is innovation in banking? What is the future of private banking? What are the most wanted improvements in wealth management?

Our faculty member Kevin D. Stringer will answer these questions on Friday/Saturday, November 10 / 11, in the 2-day study module “Innovation in Banking.

In our October newsletter we published an interview with him, which I would like to share with you.

Hope to see you next Friday!
Yours,
Peter Lorange.

Interview with Prof. Kevin D. Stringer: „Banks are inherently not innovative.“

Banking is a world generally not associated with innovation. As a whole, how can a bank be innovative?

Banks are inherently not innovative due to culture and organization. Only by changing both of these aspects will they become more innovative.

“Performance based pricing is not really linked to innovation.”

Can you exemplify in what terms their culture and organization interferes with innovation?

Bank organizations are typically hierarchical and this limits new ideas and their implementation. Secondly, the banking culture is incentivized for the short term—quarter by quarter. The longer and deeper thinking required for innovation is often neglected.

Innovation in Banking?

Mobile banking is regarded as an essential tool by the new generation of consumers and businesses. Is that the key?

Mobile banking is a modern form of banking, no doubt. But I don’t look at it as an innovation. As a matter of fact, mobile banking is just a transmission channel, which makes data transfer easier. It is also increasingly at risk from cyber threats.

True innovation would be to reconsider investment models, which focus on sustainable energy production, fair trade models and so on. Is that something within the realms of possibility?

The answer depends on how you define true innovation. If you think innovation needs a sustainable foundation like the one you mentioned, then the answer is yes. And in fact, some banks already offer investments in sustainable or “clean” sectors. If you define financial innovation simply as newly developed forms of investments to ensure a customer’s interest, it can be anything.

Quite a few banks have a performance-based fee structure. Do you consider this to be the right way or is it rather a strategy away from innovation, back to maximizing profits?

Performance based pricing is not really linked to innovation. It is just one among several ways for banks to earn money.

How important are competences such as behavioral finance and macro-political insights?

Both are extremely important. Banking clients ultimately make decisions based upon behavioral mechanisms. Similarly, banking, as an industry, operates in a broad, geopolitical context. To understand the relation of political issues and investments is vital for financial consultants.

How much innovation is imposed by regulations (like the ‘clean money’-strategy of some Swiss banks)?

If you understand innovation as new strategies or operating models, then regulation is largely driving this change.

Dr Kevin D. StringerDr. Kevin D. Stringer is the full-time Chair, Walker School of Business and Technology, Webster University Geneva and a Visiting Professor at Thunderbird School of Global Management. He teaches as a professor in graduate international affairs programs in various countries, and lectures in international banking at the Swiss Finance Institute. With extensive management and leadership experience at three major Swiss banks, he has expertise in financial institutions, banking operations, wealth management, the European Monetary Union (EMU),and offshoring / outsourcing strategies for the financial services industry. His research interests are correspondent and transactional banking, offshoring / outsourcing, strategic banking operations, and microstates. He holds a PhD from the University of Zurich, an MA from Boston University, and a BSc from the US Military Academy at West Point.

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