Innovation in Financial Services – Report from the Accenture Financial Services Innovation Awards 2013
Prof Dr Walter Van Dyck, Vlerick Business School
The goal of the Accenture Innovation Awards for Financial Services is to promote and reward innovative, financial services-related new products and concepts on the Belgian and Luxembourgish markets, resulting in a Jury Award and a Public Award. Following a first success in 2012, the 2013 edition has been launched since last summer. Vlerick Business School is official partner of the Awards and the winner of this contest will be awarded a seat in ‘Entrepreneurial Innovation’, the first track of the Executive Master Class in Innovation & Entrepreneurship. 60 concepts went through a selection process. In December 2012, a jury of professionals selected the 25 most innovative concepts. This Top 25 has been presented to the public who selected the winner of this year’s Public Award. The jury selected their own Jury Award winner. The Jury was composed of professionals from the financial sector, among which are Ignace Combes (Chairman of the Vlerick Centre for Financial Services) and Vlerick Senior Researcher Dr Bjorn Cumps. Prof Dr Walter Van Dyck analysed the different projects and presented the analysis below during the award ceremony.
Innovation is the main source of corporate growth and renewal. Typically, high-tech and life sciences companies are known for the extent to which innovation is the origin and the lifeline for their strategic plans. However, this second Accenture Financial Services Innovation Award has shown that also this sector, considered by some as very traditional and risk-averse, has the potential to generate creative ideas to the benefit of their customers. Innovative ideas presented will not only lower transaction costs or enhance processing speed. Indeed, some offer quite novel product ideas that will fundamentally change the way people experience financial services. The role of the innovation ecosystem i.e. the set of organisations involved in capturing value from innovation, becomes more and more important, expanding into non-financial services domains.
Analysing the 2013 Award idea submissions we distinguish between three categories of innovation on a spectrum from technology push to demand pull as also found in other industries; discoveries, creative combinations, and asset optimization.
In contrast to last year with at least one contestant offering a novel mathematical method supporting investor risk profiling, portfolio and wealth management, in this 2013 Award Top-25 we did not find any example of the first category. This probably can be explained by the Award participant profile being more dominantly ICT-based, hence more process- than financial product-triggered coming up with new ideas. Another explanation could be that participating organisations are not inclined to unveil their science-based product innovations whilst fearing fast copying in an open idea contest.
Asset optimization ideas turn around data governance, data analytics, and improved convenience for and connection with mobile customers. An example of the former is Collibra Data Governance software. Driven by the increasing complexity, sheer volume and variability of the financial data to be handled this software enables system-wide agreements on data definitions, supporting processes and roles and responsibilities. This enables transparency and professional data management, which is much needed in an industry under increased scrutiny of regulatory compliance reporting. Risk Management Center by Tinubu Square, then, is a data analytics example geared to detecting credit risk exposure in a SaaS solution. A typical example of the latter type of innovations is iPAYMO applying location and context awareness based on satellite positioning to prevent fraud and abuse. Or Keytrade Bank app enabling users to manage their accounts in their specific way, enabling them to directly invest in the main global stock markets.
Creative combinations examples connect partners from different environments, thus enlarging the ecosystem scope to include parties creating value for the customer which don’t typically belong to financial services. Belfius’ Multipurpose card is a case in point. It is the first debit card available on the Belgian market containing additional or contactless functionalities to access buildings, interact with contactless payment systems or vending machines, to be used in merchant loyalty programs or for meal vouchers. An even more radical example is provided by BPost extending the typical financial ecosystem around the customer to include the logistical chain from purchase to home delivery. Their proposed solution allows a customer to order anything on- or offline with merchants and have it delivered and paid at their doorsteps. This requires an open ecosystem composed of merchants, a postal partner and financial services organisations all integrated into one customer-centric platform. Finally, the winners of the 2013 Award, MyMicroInvest and KBC Save for Goals make creative combinations between communities and value creating ideas. MyMicroInvest facilitates co-selection and co-investment between individuals and professional investors in a crowd-funding platform. KBC Save for Goals allows individuals to set aside money for a purpose and to let other people help them doing so through social media, thus connecting the social and financial ecosystems into one world.
An interesting point of attention is the distribution of ideas amongst the asset optimization and creative combinations innovation categories. While last year the emphasis was firmly on asset optimization as opposed to creative combinations with respectively 21 versus 3 out of the Top-25 ideas presented, in this 2013 Award, the result between these two categories was far more balanced with still 14 asset optimization ideas, but with now 11 creative combinations, including both winning ideas, completing the Top-25.
This now more healthy balance between asset optimizing ideas and surprising creative combinations in an enlarged ecosystem can be seen as a positive evolution while increasing the potential impact of innovation on growth and renewal of the financial services firm. This is while asset optimizing ideas have a largely bottom-line value appropriation effect; they limit risk, save transaction costs and make existing customer relations more sticky while offering higher service convenience, hence they increase profit. In contrast, creative combinations have a top-line value creation effect, attracting new customers to disruptive services they would not have signed up for before because of the too high risk involved, as in the crowd-funding MyMicroInvest case. Or they can do so by creating value serving an unmet need like helping people realize their savings plans by connecting financial systems with social media, as in the KBC Save for Goals case. Actually, the surprising combinations effect in both cases are very similar to the Nintendo Wii case that dramatically enlarged the gaming industry by creatively combining existing gaming and positioning technology to address the unmet need of a very large ‘blue ocean’ of non-gamers; a population by definition much larger than the existing ‘red ocean’ gamers market segment. Or how at first sight very different industries like consumer electronics and financial services can show very similar innovation-related behaviour.