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December 19, 2011


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As a participant of this particular conference I feel that your portrail of the atmospehere is somewhat skewed. Far from being cynical or short sited I think discussing the way money can be made by implementing new services is quite necessary, especially considering the investments that need to be made. I think both with banking as with the story above the answer is quite simple. The money is in providing services that appeal to customers. Finding out what these are is of course the tricky part and I feel that this should be the focal point in answering the "show me the money" question.

Chris Skinner

I did say that some audience members were warm and engaging, but the comment: "where's the money" is always going to create a discussion as innovation, by its nature, cannot show you the money.

Innovation is new - there's nothing out there to show how innovation will perform - so you can only point to opportunities to make money by being more customer engaging, more market specific, more capable of financing, and more nimble at finding alpha.

All of these things are then just a punt.

However, most bank decision makers are unwilling to take bets on a punt, which is why it's easier to focus upon losses.

It's easier to prove the business you might lose rather than the riches you might gain through innovation.

This is because, as per Clayton Christensen's Innovator's Dilemma, the incumbent is always being targeted by the new entrant, and the new entrant will always innovate whilst the incumbent can only evolve.

That's the point of the above and why I enjoy the debate with the cynic.

Bottom-line: the cynics die as they are eventually destroyed by the visionary.

Serge Milman | OptiRate

Show me the money is EXACTLY the sentiment that ought to be expressed. All endeavors should result in improved profitability one way or another, otherwise, why do it!? Profitability may not be immediate, in fact, organizations may expect to incur costs during ramp up period, but there must be a set of expectations and specific quantifiable milestones against which the management team can assess the performance of any given initiative.

But your story is very appropriate. All Banks - especially smaller Banks (Community Banks and Credit Unions in the US) should be asking 'Where is the Money?' question when it comes to all capex and opex investments - including branch network support / expansion, marketing initiatives, etc.


Good article. Let's probe a bit deeper as to not why the question "show me the money" is asked but why there is dissatisfaction at 'any' answer that is provided in response to it.

1. there are no weather beaten models to arrive at a business case. So the good old banker of the brick and mortar banking world tries in the best case scenario, to find the lost gold ring under a lamppost that is lit, rather than where it was perhaps lost. I mean rather than lighting a new lamp.

2. Consultants talking vs practitioner talking - sorry Chris! So it is like 'we will listen to the bright new ideas from you but we know the organisational bureaucracy and what it takes to execute'. If there was a bane for consultants, it has been the word 'execute'. We shall see how the movenbank experiment of Brett lee will go.

3. Finally credit be given to the new models. Innovation is undeniably fruitful. Truth be told, we are going to use the new models anyway, so why not devote some experimentation dollars for the new bank? Obvious as it appears, as long as CEO's are not set goals by their boards on ARPA or wallet share from online customers or percent spend on R&d in a bank, things will remain static.

A nice way to silence critics for consultants would be to tie their fee to the outcomes from innovation streams?


Innovation and incumbents are like oil and water. Instead, present your ideas to venture capitalists. They're willing to take a punt, that's the business they are in. Banks are in the business of protecting transaction margins, not massacring them.

neil burton

The full question is surely ‘show me enough money to persuade me to change’.

In a networked economy, there are massive inhibitors to change. A recent report from the Boston Fed references market failure which ‘occurs if the sum of consumer benefits and bank profit (social welfare) exceeds the cost of bringing a standardized service to a market, but, in reality, there are insufficient private incentives to introduce or to subscribe to this service. Market failures of this type are more likely to occur in network industries where consumption benefits depend on the number of other consumers and firms that provide the service.’ Sound familiar?

I agree with Serge that ‘all Banks - especially smaller Banks (Community Banks and Credit Unions in the US) should be asking 'Where is the Money?' The Fed report quotes an earlier paper: ‘One issue of great interest is the relatively high prices charged by commercial banks to their customers for completing a transfer. While the Federal Reserve charges banks less than $0:25 per transfer, banks charge their customers prices that vary from a few dollars to as much as $50.’

And ‘most banks do not even offer their customers the interface for making A2A (account to account) transfers, despite the fact that ACH transfers are the least costly transfer method for commercial banks. In fact, frustration with the inefficient payment systems in general and with the nonavailability of A2A electronic transfer services in the United States in particular, goes back almost 40 years.’

So it’s clear where the money is; and also the lack of incentive to change. As usual, change will be driven by consumers; who may move to the upstarts if they offer better value.

But it would be a shame if all innovation delivers is the same thing, better. It should also deliver a better thing. Roll on 2012, Movenbank and the rest; and over the break, tip a glass to Chris and others who are prepared to ask the right questions.

Copernicc (Kosta Peric)

I love the Branch/Upstart story. I think we are half-way through the story, where some clients of the Branch start experimenting the Upstart's wares and finding them good. This is also substantiated by Neil Burton's comment, to which I wholeheartedly agree- in fact I have been finding ways to avoid these high charges and bad forex rates (see the PayPal and UKForex related entries on my blog copernicc.wordpress.com). So, yes, the Branch should be worried about the Upstart, which is something we keep on saying in Innotribe events.

Jonathan Charley

The Branch and the Upstart is very topical at this time with Northern Rock going to Virgin Money (The potential Upstart) and Lloyds Banking Group Verde appearing to head towards Coop (The Branch). This is explored further in http://www.itsafinancialworld.net/2011/12/is-northern-rock-decision-good-for.html


I love it when incumbents frame innovation entirely the wrong way. Like giving a physics test for entry to Juilliard, their spreadsheets are entirely ill-suited to supporting a robust and vibrant innovation investment program. Which is great for folks like us, as it means that we suffer no competition from them and our portfolio companies find it that much easier to create significant differentiation. It's not that there aren't frameworks, metrics and tools on which to base a robust investment policy, it's just that they weren't taught in business school and are very different than the toolkits incumbent managers are familiar with. Innovators dilemma indeed. Anyhow, thought you might like the way I think about the "audience" for innovation, see http://www.parkparadigm.com/2009/07/13/the-bond-salesman-and-the-estate-agent-a-modern-day-parable/

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