Innovation in Banks: Selecting the Best Models

Industry Trends
Global

Abstract

 

Threats from new entrants and incumbents motivate banks and other financial institutions to invest in innovation in a variety of ways. Celent has identified six main models that banks use today to increase their visibility into new products, services, and technology, and to improve their innovation capabilities.

This report reviews these models, provides case study examples, and outlines key dimensions of each. It also provides an analysis framework for banks to use to optimize their investment levels among the different options.

“How innovation will impact the financial services business in the future is a guess,” says Mike Fitzgerald, a senior analyst with Celent’s Insurance practice and coauthor of the report. “When facing such uncertainty, diversification is a prudent strategy. Celent encourages banks to clarify their preferences related to key considerations, evaluate multiple innovation models against these choices, and then select and implement the most appropriate methods.”

“The approaches outlined offer a variety of features that can allocate innovation investment in ways consistent with the bank’s risk appetite, culture, and customer base,” says Dan Latimore, senior vice president of Celent’s Banking practice, and coauthor of the report.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

2

Models

4

 

Incubators

4

 

Accelerators

5

 

Venture Capital Arm (Partial Investment)

5

 

Outright Purchase

6

 

Labs

6

 

Innovation Center of Excellence (COE)

7

 

Other Models

8

Selecting Innovation Models

9

 

Dimensions

9

 

Evaluating Innovation Models

10

Path Forward

15

Appendix

16

Leveraging Celent’s Expertise

21

 

Support for Financial Institutions

21

 

Support for Vendors

21

Related Celent Research

22

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