Tamara Tanaskovic/ September 9, 2019/ Uncategorized

New ideas are necessary. Banks are spending resources to be able to comply with regulatory requirements. How can they remain competitive and innovative towards new market entrants, such as FinTech companies? A first starting point to avoid the threat of competition would be to team up with FinTechs and technology companies. This would allow for productive collaboration in specific areas such as customer experience, products, efficiency and security. In the context of innovation management, data analytics is becoming increasingly important to acquire new customers or to offer digital services for example. However, banking partnerships need to be designed to take regulatory enforcement and process risk into account.

V Various forms of collaborations are possible: mergers, acquisitions, partnerships, the start-up of FinTech subsidiaries and business start-up programs or joint ventures to finance new businesses. The corporate venturing model can be portrayed as a form of partnership. Another possibility is open innovation, which is to be distinguished from closed innovation.

Open Innovation vs. Closed Innovation

The difference between open innovation and closed innovation is determined by the way innovation is generated. While the closed innovation model operates only in a self-contained business environment, the Open Innovation model incorporates external knowledge. An open innovation approach goes even beyond simple collaboration. It in fact proposes the exchange of data and information with all stakeholders of a company’s ecosystem. In a way that other companies or even industries can be involved. Open innovation is based on the idea of ​​providing a company with all the resources (data, knowledge, ideas, etc.) available in the relevant ecosystem to pursue an innovation strategy. Thereby, it involves a two-step process: on the one hand, the exchange of know-how among the players and on the other hand, the implementation of such know-how within the company.

This approach enables banks to minimize or avoid costs for research and development (R & D) and shares the risks associated with market uncertainty. Collaborations are often a win-win situation. For example, the lack of banking licenses may prevent FinTech companies from offering certain types of services. Collaboration with technology companies can create new talent and might enable established operators to more innovation. Often especially small banks are unable to cope with the pressure to innovate. Due to the lack of human resources, they focus solely on fulfilling compliance guidelines. But even then, synergies can be used to simplify business processes.

Finally, banks can also develop their own innovation strategy, which would lead to rising costs for research and development. This type of strategy is referred to as Closed innovation, in which the company uses only its own resources to promote innovation. However, R & D departments tend to focus on just a few projects, neglecting technological progress.



Open Innovation: The New Imperative for Creating and Profiting from Technology, von Henry William Chesbrough, 2003.

Photo by Diz Play on Unsplash

Tamara Tanaskovic

About Tamara Tanaskovic

Tamara Tanaskovic is a Senior Consultant with targens GmbH. After her university degree with the focus on criminal law, postgraduate studies in London in the fields of competition law, bank regulation and compliance followed. She is currently project manager within the product SMARAGD MDS and therefore responsible for the creation and optimization of rulesets in coordination with the respective department of the customer company. Furthermore, the specialist review and the determination of legal and regulatory requirements to the SMARAGD Compliance Suite are part of her core competences.