Dose More $$$ Mean More Innovation?
Smaller banks and large financial institutions (FI) have been subject to a paradox where smaller banks are known to be more consumer-friendly, but the trade-off has been that they are slower to innovate than larger FIs.
The Innovation Readiness Playbook investigates how much truth is in this perception and seeks to answer the question of whether bigger budgets allow for more innovation.
Not necessarily. The study found that greater assets do not always translate into greater innovation and that a company’s culture plays a prominent role.
Banks with assets below $500 million have boosted their Index scores — from 33.6 in Q3 2017, the last time this survey was conducted, to 35.2 in Q4 2018 — while those of medium- and larger-sized FIs have declined.
One significant finding from the Innovation Readiness Playbook was that budgets don’t always correlate with innovation. Small FIs devote roughly one-third (33.2 percent) of their budget to innovation while large FIs spend 22.8 percent of their budget. Mid-sized FIs spend the largest share of budget on innovation (45.7 percent).
Regardless of investments, small FIs have grown more aggressive in their innovation strategies. The study shows 40.4 percent of them angled to be first to market in 2018, more than double the share that took this bold approach in 2017. More than half (56.0 percent) of large FIs also try to roll out new products before others, but that figure hasn’t changed radically since 2017. Half of mid-sized FIs observe trends first, then launch innovations.
Size is also playing less of a role in performance than it used to. Smaller FIs make up 20 percent of top performers, while larger ones comprise just 6.7 percent. The remaining 73.3 percent of top performers were midsized FIs, which isn’t surprising considering that midsized FIs comprised the majority of the firms surveyed.
What do high performers have in common? The study suggests success is related to funding, timeliness, managerial leadership and organizational structures.
Keen for more insights into financial institutions and their focus for the furture? Check out PYMNTS.