How to Foster an Innovation Culture Within Banking:
The Ultimate Guide

In McKinsey’s 2021 article, The ongoing rise of open financial data, the authors posit that open finance will reshape the world’s financial services ecosystem.

They argue that tech-enabled innovation is disrupting not only the mechanisms of banking, lending, insurance, and more, but also their very faces.

Hungry fintech start-ups have sprung up across the world, with their rise accelerated thanks to open banking standards and legislation being enacted in markets like the EU and the UK. Even regions such as the US, where open banking has been more market-led, have seen this growth.

The uptake in new banking platforms across the globe has been eye-opening. A McKinsey study found 97% of APAC consumers consider digital their preferred channel or already use it.

How to Foster Innovation Culture Within Banking

This global shift to fintech only increased during the pandemic, where consumers required more online access to their financial products. Almost one in two consumers in the US are using a fintech solution.

Therefore, how should incumbents respond and lead the way in building better digital experiences for customers? Especially in an industry as regulated as banking.

‘Innovation culture’ will be the bedrock of how firms survive the dynamic landscape of twenty first-century finance. By being daring and decisive, innovation culture goes beyond what other creative environments deliver to their organizations.

But building an innovation culture to meet consumer expectations in a competitive manner, while also balancing regulatory requirements, presents a unique challenge in the banking space.

Find out more about innovation culture and how to foster innovation culture within your company, while still adhering to necessary regulations.

  • What is Innovation Culture?

With the global shift to digital financial services experiences, it’s crucial for both traditional and modern banking institutions to make changes that help them compete. If your company has attempted any form of internal transformation, you’ll know how easily these initiatives can be met with delays or setbacks.

Making changes without buy-in from the full organization is where many businesses fall. Especially when trying to change at pace.

To implement the agility and digital capacity needed to bring about successful and long-term technological change requires your business culture to become more innovative

Changing a business culture isn’t as easy as emailing out a mandate — it comes from encouraging smaller, individual changes. Businesses need to inspire their employees to think differently. To help encourage this, you should promote:

The Resolutely Urgent Need to Transform Digitally

If you encourage new ideas, you must give your employees the freedom to not obsess about budgets, deadlines, or making mistakes.

On the other side of the coin, unlike in other creative environments where ideas are simply encouraged, innovation culture focuses on real-world problems and applying ideas toward such. Innovation culture is goal-orientated and seeks to measure progress along its path — so it must still be structured.

The purpose of innovation culture in the banking space is to deliver more business in a secure and compliant manner. The customer experience and your consumers’ needs should remain at the center of any innovation culture, as you can’t deliver more business without meeting these base requirements.

Improving the customer experience is key to remaining competitive in the digital space.

Why is Innovation Culture Important?

A business culture that focuses on innovation can be great for the company’s bottom line. But establishing an innovation culture is also beneficial to organizations for the long-term too.

Self-disruption ensures that companies stay at the forefront of what the market needs and where the use of technology to meet, and in some instances define, the market needs is heading.

The best way to meet business objectives is ensuring your bank is meeting market requirements, and it’s the use of technology to meet your objectives that delivers value.

Creating an innovation culture may come with obstacles that make it difficult to enact and sustain. Expect resistance whenever major changes are made in an organization — employees can feel scared or threatened. So, it’s important to show how beneficial innovation will be, to help change mindsets and ensure the culture becomes self-sustaining.

For example, open banking is an innovation that’s changing the landscape and standard of financial services — improving the lives of customers and making processes easier for banking organizations.

  • How to Foster an Innovation Culture

As the banking industry has started to get to grips with creating an innovation culture, competing methods have formed. Through research and in our experience with financial services firms over the last 17 years, we’ve narrowed this down to two — the milestone approach and the ‘zero legacy’ approach.

The Milestone Approach

This method focuses on an iterative approach to developing an innovation culture — where companies accelerate change and achieve structured self-disruption by breaking a large problem into smaller milestones.

Here, an organization may build on their existing technologies and then gradually transition to a whole new method.

In most cases, this iterative approach is the simplest way to introduce a new system into your business. By making small, steady changes, you can ensure you always comply with banking regulations, and have the time required to build consensus among decision makers at the board and senior management levels.


Larger banks are more likely to take a milestone approach because it’s less risky, and it’s much easier to digitize in stages than overhaul their way of working entirely. Barclays is a great example of a large bank that’s enthusiastic about embracing change, but is doing so gradually.

In 2012, they released an app to allow financial transfers through mobile devices. Based on employee and user feedback, Barclays began its “Digital Eagles” program in 2013, which provides additional training to staff and advice to customers struggling with digital banking.

In 2018, again in response to user requests, Barclays implemented a feature that allowed users to turn off in-app payments towards certain types of retailers to give customers more control over their spending. At the start of 2020, during the COVID-19 pandemic, the bank transformed its onboarding process to ensure its customer service staff had complete understanding of the company’s new digital ways of working.

Instead of undertaking a massive, company-wide update to all of its departments and services, Barclays has spread its digital transformation out over years. Each innovation was only implemented after analyzing the results of prior changes. Crucially, Barclays’ strategy allows time for reflection, allowing staff and customers to fully get to grips with new systems. In this way, the milestone approach can significantly reduce risk.

The ‘Zero Legacy’ Approach

Some banks have taken the opposite approach. Rather than an iterative method, some companies decide to go all-in on new technologies, getting to a target state where they would no longer be utilizing any of their existing systems, in the hope that taking this larger stride will help them avoid being left behind.

This hard break between systems demands that organizations completely reimagine and reinvent their processes, so that there is no resemblance to their previous version. There is an organizational and cultural shift that must take place to break away from legacy systems.

For smaller banks with less existing technology, zero legacy could be more achievable. But it remains an expensive way to change — both in terms of the financial cost of the new technology itself, and the time cost of training staff.


Rather than iterating on existing technology, the DBS philosophy is to adopt emerging technologies they hope will reshape the banking industry.

Whether it’s a blockchain-based ecosystem to help trade digital assets, or a digital advisory solution powered by AI, DBS use their innovation culture to find the next big thing in tech and mold it into the digital financial solution of tomorrow.

  • Innovation Culture Best Practices

Whichever approach you decide to take, trying to implement an innovation culture in your business can be daunting. So, we’ve put together this list of management best practices to help you navigate through the change.

Flat Leadership Structures

Even if the hierarchy in your business looks flat, the culture that has built up around it may not be. How people interact and behave around each other can be different to what their official positions may say.

To encourage innovation, it helps if your structure is culturally flat. This is where all employees are given the space to be the individual they are — making their own decisions, taking the required actions, and having their opinions matter. Instead of deferring to someone because of their title, an employee can look to those who are most competent in their space.

Flat leadership structures can help your staff respond to changes quickly, as they don’t have to follow a long process of signoffs (where regulations permit). The diversity of ideas expands, as the entire workforce is given the opportunity to pitch in from their own perspective, tapping into a whole range of knowledge and expertise.

This type of structure still requires strong leadership to help guide everyone with a clear set of goals and objectives, and the key principles on how they should operate. Yet, this doesn’t mean that senior leaders will remain distant — instead a flat structure allows them to be close to the rest of the team, directly involving themselves in the ideation stage.

In any workplace structure, whether flat or hierarchical, the power dynamics at play can be notoriously difficult for new and more junior employees to navigate.

Innovation can and will result in failure at points. Therefore, for genuine innovation to take place (rather than lip service towards project progression), teams must feel safe to report failure.

Senior leaders must feel like they’re approachable and valuable to all employees, being ultimately accountable for all decisions made under their vision and encouraging teams to keep trying to find new solutions.


Wise, formerly TransferWise, specializes in multi-currency accounts. They operate in a mostly flat structure, with autonomous teams for each space within the business, with just the main leadership team above them.

This has helped Wise move faster with fewer bottlenecks. Trust is ingrained, with teams managing their own time keeping, which has allowed Wise to scale at speed.

Top-down Change

Even within a flat structure, an innovation culture must be driven from the top down to appear valid to employees and achieve buy-in for the company vision.

In many instances, executives pushing digital banking innovations encounter push-back from the board and senior executives. Often, this can be from the perspective of 'why fix something that's not broken' in terms of compliance and their current digital offering.

Push-back can also stem from the fear that innovation inevitably leads to companies needing to explore projects that delve into unknowns and make allowances for failure.

You must have top-down support — it’s a non-negotiable aspect of winning at digital transformation. If you encounter this type of push-back, it’s best to highlight what you can do to help mitigate these fears to win over the necessary support for an eventual top-down approach.

By setting high standards and recruiting top talent, senior leaders can head into projects with the confidence that exploring risky ideas is coming from the right place — with the best skills and knowledge available.

Highly competent people with the correct work ethic help turn failed projects into learning experiences, which is key to keep moving your innovation culture forward.


Paul Cobban, former Chief Transformation Officer at DBS Bank, was credited with transforming their approach to how internal decisions were made, by changing “Blockers” to “Enablers”. By holding weekly meetings with all decision makers, ideas could be given the go-ahead instantly, rather than team members having to constantly wait for approvals.

This strategy helped save time for both employees and customers, raising DBS’s customer experience ratings.

Balance People and Processes

Software tools are easy to come by these days, making it simple for any organization to introduce new technologies to their workplace.

But while acquiring a new technology may be easy, stakeholders must not forget the place of people within the organization — particularly, the training needed to extract the benefits of new technologies and the valuable insights they hold into the company.

For a new system to function well, it needs a collective effort from the entire workforce. This can lead to employees seeking help from colleagues who may not have the time or knowledge required. It’s important that people aren’t left to their own devices, and instead are given the information they need to work within the system.

The above example demonstrates how, when implementing an innovation culture, it’s also helpful to create an ethos where both accountability and collaboration complement each other.

Leaving people alone to figure out processes on their own isn’t productive. But nor is expecting others in the workforce to take up the slack.

Individuals should be given the scope to innovate on their own and make critical decisions, but senior leaders need to provide their own input and review the output of their team.


Canada’s BMO set up a program called BMO Forward to reskill its employees, helping them gain the technical skills required for the new digital way of working. This was part of the $78 million BMO invests annually in employee learning, which works out as about $1,726 per employee.

Investment such as this allowed the bank to stay competitive during the pandemic and prepare for the future of work.

Careful Experimentation

To foster an innovation culture within your business, you must be comfortable to experiment, which can lead to uncertainty and ambiguity. You can’t have all the answers or be able to produce a new product straightaway.

At the same time, innovation shouldn’t be disorganized. Although discoveries can occur by accident, they’re highly rare. And so, you must carefully manage the direction of innovation by learning from previous trials of ideas, much like the scientific method.

It’s important for employees to practice self-disruption and continual self-improvement, while creating new innovations in a disciplined way. This means establishing clear criteria right from the start, with senior leaders helping to focus their team on a specific goal or objective. It also means knowing when to stop putting resources behind a failing idea — it’s better to kill a project and learn from it than wasting time and money trying to make it work.

Experimentation is key. Trying many different projects allows the team to find out which type should be killed or evolved. There are no bad ideas, only learning opportunities.

Of course, this can be a balancing act, as it can be difficult to know if you’re about to shoot down a hypothesis just before it bears fruit or giving too much time to a project that will never work. As always, experience in these types of situations will help in the next one.


HSBC has built a culture of innovation through upskilling and setting up innovation committees throughout the bank. Catherine Zhou, HSBC’s Global Head of Ventures, explained:

“By creating a safe space for experiments, we are driving structured self-disruption. Energizing colleagues and partners in this way brings the best ideas forward for incubation and investment.”

A Safe but Honest Space

One of the best ways to help implement an innovation culture is to ensure that all employees feel safe to be themselves and speak openly about issues they encounter.

If an employee doesn’t feel able to challenge another’s idea or viewpoint, this can lead to them being unable to put their own ideas across, which stifles innovation.

Of course, this works both ways — everyone needs to be heard. So, people must feel safe to receive criticism and give it too, whatever level they’re at in the business. This helps ideas to evolve and improve, by helping each other to find the best ways forward.

Being open and honest can be tricky, and lead to feelings and egos getting hurt. So, your senior leadership team must show the correct way to give and receive analysis and be constructive while doing it.


Lloyds has developed a culture that supports change and innovative behavior. By eliminating the “fear of failure”, the bank’s environment is one where employees feel comfortable sharing ideas.

Head of Innovation Culture and Community, Miranda Drummond, explained that “it’s about how to get people to experiment and feel comfortable to bring their ideas and to think differently”.

  • Empower your Employees With
    an Innovative Environment

Innovation culture is the cornerstone of how financial services firms will remain competitive in today’s volatile marketplace.

By engaging in careful self-disruption, incumbents can leverage the latest technologies to become more agile and retain their customer base. Similarly, start-ups can ensure they maintain their market focus and USP.

The technology your business uses plays a vital role in enabling an innovation culture. Slow, siloed system don’t encourage or facilitate innovation-friendly practices.

The way in which you onboard and gain traction from within the organization to utilize the technology you introduce to the bank also will play a role in building innovation culture. Having the best technology in place without ensuring your teams use it to continuously improve their work and deliver better customer experiences won’t help the business progress.

Today, a banking innovation culture means a culture that is friendly to collaboration with third parties. If your technology doesn't promote collaboration through modern interfaces or enable dynamic responses to the needs and requests of your partners, and doing all this securely and without breaking compliance, you will not build the right culture to compete.

However, fostering an innovative culture is especially difficult. An iterative approach allows senior leaders to cultivate the new workplace environment thoughtfully and instill its value in workers.

Yet, the zero legacy approach can deliver the benefits of cloud-first tools and dynamic teams faster. Whatever your chosen method, your newly innovative workplace culture must be valid and empowering to employees for it to sustain.

To explore how to foster an innovation culture, and how technology can help you build it, get in touch with our team.