Innovation is the key to growth. In the right doses and with the right timing it can be incredibly powerful and profitable in competitive markets. There is no question that innovation comes with its own set of challenges and risks, which is why innovation is a critical component for successful long term risk management strategies.

Financial institutions have to overcome many technical roadblocks that can impede their innovation goals, especially as they navigate the compliance landscape. Whichever route they choose, the end result must be secure, responsive, and accurate.

A lot of clients often feel as if financial institutions can only pick one or two of the aforementioned three attributes. Software can be accurate and secure, but responsiveness lags. However, with the right risk management tools, financial institutions can have it all.

The Challenge of Innovation

Financial institutions are constantly trying to leverage the latest and greatest technology, aiming to make their customer and user experiences easier and more efficient. From digital identity solutions, biometrics and decisioning tools to name a few, there are simply too many tools to evaluate in the market . To make matters even more challenging, there are new innovative fintech solutions coming out almost every month.

So how are financial institutions able to innovate quickly and thoughtfully with a bounty of choices and outcomes to consider?

No institution is going to shift from one technology solution to the next and completely change their processes every time. Organizations need to have designed a flexible enough system design so that when new technologies are released into the market, they can easily leverage that new technology without having to rebuild large portions of their technology stack. Inflexibility is the antithesis of being able to innovate and keep up with technological change.

Institutions are faced with an even bigger challenge when trying to innovate around background, or supporting processes. Often these underlying processes do not change fundamentally, either because they are designed for specific reasons, such as regulation, or the change management process around the policies themselves is very bureaucratic within the organization. What does often change are the tools that are being used to facilitate or manage that process. Adapting to those changes leads to more change management, which in itself may be manageable, but left unchecked over several innovative cycles can leave users overwhelmed and frustrated, having to constantly re-learn a new process.

Deciding what is useful can also be a challenge. After all, there are a lot of buzzwords being used—AI, machine learning, neural networks. These terms sound great and intriguing, but what specifically can they deliver to financial institutions? There are certainly ways that AI and machine learning can benefit financial institutions, but every organization has to ask itself two important questions: why should they implement these services and how they will be implemented. Institutions that cannot answer these basic questions will find themselves with very expensive and lengthy implementation projects that ultimately do not deliver on their desired business outcomes.

By leveraging low-code workflow and process automation platforms, such as Pega, organizations can ‘plug and play’ and see which tools within a system can work for their process. After a short period of time, an organization might feel that that a new software solution is not delivering the value they anticipated. At that point, if they are using a platform, removing or replacing the tool (and even testing out a different one) is much easier than working within a system that requires traditional programming. Organizations don’t need to rewrite part of a business process to accommodate a new technology, rather the technology supports the process and can be as flexible as needed over a longer periods.

Aside from technology, factors such as competition and regulatory restrictions can create friction to the innovation process. Organizations can reframe these challenges in a transformative way by enabling change through software.

As financial institutions change and grow, they need to have the flexibility to integrate future innovations. After all, a financial institution cannot just start from scratch every time they switch systems or undergo a major upgrade. Financial institutions need to have foundational infrastructure through which they can plug and play specific end-point technologies. This flexibility is paramount in order to encourage innovation while enabling employees to be the most productive.