It is undeniable that innovation has a very important place in today’s world. Because keeping up with novelties is one of the biggest factors to grow our business and develop ourselves. Therefore, businesses that cannot keep up with innovation and fall behind, not only be unable to maintain their current size but also will be erased from the sector over time. The fact that innovation is so important makes it vital for the banking and finance sector whose most important capital is money to adapt developments.
Innovation means novelty. In other words, institutions or individuals who adopt an innovative approach aim to do what has not been done before or to adapt existing innovations in different sectors. Using innovations, it is aimed to develop products and services, business processes, organization, and business models. Therefore, it is very important to adopt innovation in a competitive market and stay in the future by applying innovative solutions.
The world’s rapid growth, emerging technologies, and growing competition are testing actors, especially in the finance sector, with greater challenges than ever before. So, the information age makes it easier for many actors to access information, whereas it is reducing the competitiveness of existing institutions. In this case, what needs to be done to get out of this challenging situation is to adapt the work done for global developments and to invest in the future. So much so that, a study conducted by Bain & Co shows that turnover of innovative firms increased by 11% and their earnings before interest, taxes, depreciation, and amortization by 22%. Considering the banking sector, it can be said that with an increase in the area of internet use, investments in mobile banking are effective in this profitability. Now, customers can open deposit and investment accounts and trade currency and shares with mobile applications. The fact that these investments that were previously made by visiting branches or by phone can be made by mobiles now indicates that the earning of banks receiving commissions from these transactions is increasing. Therefore, both customer satisfaction and profitability of banks increase thanks
to transactions made without going to the branch.
It can be said that the coronavirus has an effect that triggers innovation and it rewards previously made innovations. Because with the beginning of lockdowns, bank branches have also closed and transactions have become possible only through the internet and telephone. Therefore, the institutions that have invested in internet banking had no difficulty in transitioning to digitalization, while the others that have not developed their infrastructure and have not been innovative enough, have become unprepared for the pandemic. According to Onur Genç, CEO of BBVA Group, banks that realized digitalization before the pandemic were able to overcome the difficulties experienced after the disease and turned it into an advantage. So, the BBVA Group, which was pre-prepared for crises and digitalized before, has
increased its trading volume by 32% during the pandemic.
Another benefit of the crisis is the increase in transactions made over the internet. Because customers who are unable to trade with traditional methods use both online communication methods and mobile banking to fulfill their goals. The banking sector benefits from innovation and digitalization.
In order to achieve innovation, it is necessary to create the infrastructure to produce innovative ideas. With the creation of this infrastructure, the inclusiveness of the firm will increase, and employees who are embracing self- development will have the opportunity to spread their ideas. In this way, employees feel more useful and employee satisfaction increases.
After the ideas are generated, it has come to choose among these ideas. In general, selected ideas are rewarded and innovation is supported. When rewarding ideas become general knowledge, more people are willing to present their innovative ideas. So, the chance to find good ideas increases.
After selecting the appropriate ideas, these ideas are put into practice. Implementing innovative ideas puts institutions in a better position in the competition and allows them to be prepared for negative conditions such as the coronavirus. On the other hand, today’s investments are made in digitalization, automation, artificial intelligence, the internet of things, and similar remote access methods. And those who were pre-prepared for these have become more successful in the pandemic.
Another advantage of innovation is that it increases customer satisfaction. Using artificial intelligence-powered chat apps makes it easy for customers to perform monotonous tasks like learning about their payables. For example, according to Forbes, an AI-powered robot named Erica, implemented by Bank of America, served 1 million users in its first 3 months.
Another element that will ensure customer satisfaction is the cooperation between various banks. For example, being able to withdraw money from different ATMs without paying commission requires the use of innovative infrastructure. With the implementation of this infrastructure, customers can make withdrawals or deposits from other ATMs as if they are using their banks.
Figures clearly show how important innovation is. Companies investing in innovation quickly turn crises into opportunities, while the others neglecting innovation cannot keep up with time and disappear from the market. Therefore, following global developments, conducting R&D studies, supporting innovative ideas, and most importantly, implementing them are among the most important things a company should do to meet the future. The banking and finance sector, which is intertwined with all the sectors, should never compromise on development and technology.