Money isn’t what it used to be.

While society has changed markedly through globalization, emergence of ‘digital natives’ and the nearly-unpredictable breakthroughs brought about by the information age, our financial systems are still largely rooted in the paradigms (and toolsets) of the late industrial age. Whether because of regulation or complexity, financial institutions have not yet been able to tap into the transformative potential of digital platforms. This research was compiled with generous funding from NTTi3, the platform IT company.

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As technological and cultural changes shift the way business is done on a global scale, companies can no longer thrive simply by being the best at one thing. Digitization of the world means that no one approach to innovation is competitive for long, and stable industries are being disrupted by companies like Google and Apple who have begun to master the art of integrating their digital skillsets with those of established partners to create nearly impossible-to-beat offerings. Organizations who are effective at tapping the entire spectrum of innovation are those who have been able to leverage their own ‘native genius’ while collaborating with other firms, tapping into major cultural trends or getting into deeper relationships with their customers.

Full-Spectrum Innovation is the idea of creating value in every possible place—from culture & society down to end users of a product, service or platform.

Innovation, both in recent history and the future, can largely be mapped to the a spectrum of innovation up and down the value chain—and most companies are only strong at a few parts of the spectrum. True digital business innovation requires tapping partnerships for the parts of the spectrum outside a particular firm’s ‘native genius.’ For a more thorough survey of full-spectrum innovation and the companies that have succeeded beyond their initial product or market, see Full-Spectrum Innovation: a Broader View of Value (Causeit, Inc. 2014)

Most traditional concepts of innovation are remarkably narrow in view. At first glance, smartphones seemed to be about the hardware, but the genius is that Apple and Google accessed nearly every element available to them—strategic partnerships with music companies, new distribution channels for their products, new business models for tech devices, and highly-integrated customer service systems. By innovating across the spectrum, they not only changed their product but effectively jumpstarted a new industry—and left their competitors trying to catch up.

It’s not just tech companies who are tapping into this full spectrum of value to create next-generation digital businesses. Airlines, manufacturing, basic consumer products, apparel companies and even governments are letting go of long-held assumptions about what they can and cannot do to ensure they survive rising costs and increasingly-high customer expectations of quality and engagement.

One change which the future will require is in the way we think about technology in relationship to business and organizational models. Traditional information technology skills and infrastructure such as networking, database management and internet access are more important than ever. However, organizations must shift their focus from IT as a utility—basically confined to a single department in a business—to informatics as a capability. 

IT as a Utility to Informatics as a Capability

Every Company is Now a Software Company
— David Kirkpatrick, Forbes

Informatics as a capability is the strategic ability of a company to consider the impact of business decisions on their technology needs, as well as the impact of technology decisions on the entire chain of value from concept to production and maintenance. This means that each person in the company must have at least a conversational ability—if not fluency—in top technologies which impact their business. For example, in many companies marketing and branding departments were the first business units to begin to bringing their own technology savvy to bear on their work, sometimes in accidental or intentional conflict with existing IT policy. Whether through third party vendors like agencies, or because they choose to hire their own technologists, marketing and branding departments have shown us that IT cannot be limited to a ‘come and fix it’ utility within the business. 

For platform-centric businesses to be successful, every person involved must be fluent in the technology decision-making process on a strategic level. 

Taking Risks with Innovation: the Castle and the Sandbox

Renowned technologist and financial services innovator Kosta Peric (former head of innovation at SWIFT, now at the Gates Foundation) summed up the challenge of innovation in conservative companies quite well in his book The Castle and the Sandbox. He suggests that regulation and stability bias institutions towards safety. As innovation is, almost by definition, a risk-taking activity, he posits that organizations should relate to their core business, which must not stray from its commitment to reliability, as a castle—a fortress which is to be protected and which can be depended on. But in the sandbox, the younger, newer ideas play and grow up into something which could, in the end, contribute to the larger whole of the castle. 

Kosta Peric, former head of innovation at SWIFT and author   of  The Castle and the Sandbox

Kosta Peric, former head of innovation at SWIFT and author of The Castle and the Sandbox

One way that large companies can do this is by keeping their eye on innovative startups and acquiring them “as-is” once they’re stable. BBVA, Spain’s second-largest bank, recently acquired US online banking startup Simple. This merger allows for Simple to continue to operate independently, preserving the unique culture and customer-friendly offerings which made it a success, while giving Simple access to the regulatory expertise and resources for international expansion which have been a hurdle for the smaller company. BBVA, in return, benefits from the innovations that Simple has pioneered in user experience and little-data-informed iteration—innovations which are difficult if not impossible for big banks like BBVA to attempt or even identify at their scale of operations. 

Data diplomacy is another way in which big, established companies can participate in sandbox innovation—making data available to startups for testing concepts or driving innovation which they would not have access to at scale. These information-sharing partnerships can result in future acquisition or collaboration as smaller companies bring their innovations to market. 

The Difference Between IT Enablement and Digital Financial Platforms


IT-enabled financial services are often comprised of a few key groups: financial institutions and their users, both of whom generate and use data. This set of interactions predated digital technologies. When IT was first implemented, it was to support existing business needs by use of computerized tools like networks and databases.

As those systems grew, supported by their IT infrastructure, the complexity level increased exponentially.  

Such systems, having not had the luxury of being designed from scratch, reflected analog business paradigms and were shaped by the presence of multiple incompatible legacy systems. Because of their vulnerabilities and how difficult they were to understand, these systems were closed to each other, proprietary and difficult for end users to access and manipulate. These limitations meant that IT was applied to accelerate analog business offerings, but did not create opportunities for new, digital-enabled value.

The major opportunity for technology to create new value in the financial services industry lies in creating and expanding digital platforms. Digital financial platforms enable multiple, interlocking systems to connect with each other. In their overlap and interconnection we can see entirely new opportunities to create value—along with new implications for technology tools and business decision makers.

In the financial world, players might include end users, reselling agents, banks, regulators, reputation data, APIs (application program interfaces), open source software and hardware, app developers and even smart currencies.

New digital financial platforms allow organizations to quickly provide or tap into crowdfunding, credit scoring, payment systems, individual data profiles (or little data), big data (the collection of all that little data), risk management, adjacent opportunities (like cross-selling related products much more effectively, or highly-automated investment of cash float), social media listening and conversation, social identity schemas and reputation management. Each could be its own piece of content, but it’s important to see how so many of them stem from—and then drive—digital business.

This combining and splitting allows new parties to take advantage of their strongest innovation capabilities, be that branding, or gathering new users through community-building, or process and data optimization—letting other parties take on the other important parts of value creation, like stable, scalable back-end systems and legal or regulatory evolution. 


Where traditional business strategy focused on creating a solid product, new business strategy is increasingly focusing on creation of platforms—especially an exponentially-valuable form of platform called a multi-sided platform—an extension of the concept of a two-sided market. 

The multi-sided platform is perhaps best modeled by Apple’s expansion of their shiny, well-designed iPhone (and iPad) to the entire platform which supports it (iTunes, iCloud, the iTunes Music Store) and then, the broader App Store, CarPlay, Apple Pay and developer/accessory ecosystems—among many others—which make the iPhone and iPad what they are today. 

Transactions used to be restricted by their dependence on proprietary technical infrastructure. Now, aggregation and APIs have made regulation the biggest barrier to platforms.
fidor bank logo.png

Fidor Bank is an online-first banking institution founded in Germany which shows how a multi-sided platform can enable full-spectrum innovation in the financial services industry. Fidor takes advantage of the cultural trend of increasing trust in social media services, utilizing social media data (with user’s explicit consent) to manage identity and risk. Because they decided to focus on web-only accounts, Fidor is able to deliver a superior online product in comparison to other companies for whom online banking is seen as an expansion of primary services—an alternative to visiting a branch or ATM—and not a major area of investment or innovation.

How Fidor Wins

Fidor Bank is an online-only banking institution founded in Germany which shows how a multi-sided platform can enable full-spectrum innovation in the financial services industry. 

Fidor’s specialization in online banking creates a new market and brand experience opportunity for Fidor—as a rebel bank which defies tradition and caters to the growing number of customers who need full-featured online and mobile tools for doing everyday business. Fidor is clear about their business model: use APIs and partnerships to maximize their capabilities and allow them to focus on listening to and serving customers. This has not only enabled Fidor to succeed with a relatively small investment in infrastructure, but has generated a lot of gravity around their brand. Driven by their reputation for innovation and customer-centricity, the Fidor community includes over 250,000 registered members who share advice, feedback and ideas in a forum on their website—that’s five times the number of account holders—showing impressive social momentum for a new company with a tiny marketing budget.

You must be open to not only in-house innovations—you should be open to the outside world, tactical infrastructure, API infrastructure, whatever way you can do it today within the modern technical environment.
— Matthias Kröner
, CEO, Fidor Bank

Regulation has to adapt with the changing business models of digital firms. For example, the “know your customer” requirement (or KYC) in the United States is a vitally important set of policies—and penalties—designed to ensure that banks are not unwittingly permitting money laundering or other criminal activities within their walls. But KYC requires the same level of scrutiny for an account with a balance of $20 as it does for one with $20,000, making it difficult and costly to serve accounts with low deposit amounts, where the burden of deeply verifying a customer’s identity with traditional tools ends up driving the cost of an account far beyond profitable levels. Banks in developing countries are working to find creative solutions to KYC requirements, but such a burden does not support creation of financial services for the underbanked or unbanked members of society, who could greatly benefit from platforms which enable them to make reliable school payments, access basic credit services and more. Regulations The regulatory environment needs to become more dynamic and adaptive to leave room for innovation, which necessitates proactively and responsibly including, learning from and educating regulators in larger innovation ecosystems.