CMOs, CIOs and Bankers: 3 behavioral tenets to spur innovation and ally with fintechs

As CMOs and CIOs in banks you probably know that Gemma Godfrey @GGodfrey, a fintech influencer, championed customer-centric approach http://bit.ly/1I4Azqi as a key response to disruptions that legacy bankers are facing from startups. As a behavior finance enthusiast I would like to give 3 tips to help you convince your managements that fintech rocks. 

The debates in this sector have acquired passionate hues. For example in her blog thebarefootvc.com, Jalak Jobanputra reports how she debated with executives of Wells Fargo, among others, whether millennials will stop using banks. Are Banks the next Dinosaurs http://bit.ly/1I8lUoF was the title of the debate. (The above blog has been deleted but was active in November when this post was being written)

Banking Reinvented https://t.co/3JVQWl2jgy @seccobank pic.twitter.com/aCnNNGgWyO

— Chris Gledhill (@cgledhill) October 5, 2015

    In another Business Insider article http://read.bi/1N25xeo focus was how JPMorgan and Wells Fargo are curtailing info aggregators like Mint and Quicken citing security concerns.

In November however, Mckinsey partner Susan Lund @SusanLund_dc tweeted about http://bit.ly/1lcDxOT, a Royal Bank of Canada initiative where fintechs (would-be Unicorns) and legacy banks were cast as allies.

Drawing from tenets of Behavioural Finance here are my three recommendations that will help you persuade decision-makers in your legacy companies to jump on the innovation bandwagon before it is too late (read costly).

·      Shift the argument from risk to awareness of underinvestment: (Loss aversion bias, status quo bias) As in savings for retirement, underinvestment in innovation is a result of tendency to fear loss and to procrastinate. So current cash flows, short term projects seem crucial compared to putting money in intangible (mythical like unicorn) future gains. Once your management becomes aware of their status quo bias, they hear you more clearly that a radical innovation budget will counter disruption more efficiently. 

·      Think future scenarios for strong decisions: (Bias: sunk cost fallacy) Far too many investors (managers) tend to defend their cumulative prior investments when making future decisions. Even when evidence suggests that current costs outweigh the potential benefits, they tend to act in a way that justifies past decisions. To counter this dwell on future scenarios. Prove for example that banking will be “on the go”.  Tell them collaborating with unicorns make sense as they have yet to achieve scale, if they can be co-opted the legacy bankers can share the fruits of disruption.

·      Make new familiar: As in personal finance, familiar looks more secure and less risky, tempting enough to forego potential benefits of the unfamiliar. So to make decision-makers feel more comfortable with disruption, dwell on new terminology (cyber-security, data monitization, blockchain) all repeated to sound do-able, accessible. If you are on the fintech side of the wall make scaling up cool and necessary.

So starting today, you need to connect with disruptors and disruptions to prevent from becoming a dinosaur. Embrace innovation. Be aware and make aware to counter fear. http://bit.ly/1KFaU1I.

Hi. My name is Ritu Gurha Lisso,  a business journalist plus content writer plus social marketing pro all folded into one. I am a polyglot and have lived and worked in Asia, Europe and now USA. I have managed to meander from art reviews to bonds market analysis and behavior finance. In my current avatar as a business communications professional and a behavioural finance enthusiast, i am passionate about creating social content and social strategy. Please feel free to reach out and connect with me @ritugurha.