Innovation is the name of the game and I am unable to think of a major bank that has innovated or disrupted the market over the past 20-30 years. Goldman probably comes closest. Goldman’s biggest “innovation” was attaching itself to Apple’s coat tails. JPMorgan has leveraged AI and other advanced technologies internally. However, JPM has yet to leverage those technologies in a manner that would enable the bank to acquire customers and deposits at a much faster rate. Incoming Citi CEO Jane Fraser may have better luck driving innovation than her predecessor (revenues declined on his watch). Before we pull out the miniature violins and make excuses about the low interest rate environment of the past 12 years and how that presents a difficult backdrop for growth, you are barking up the wrong tree. CEOs are paid to problem solve. Move into adjacent markets with new products and bold acquisitions if that is what is required to grow.
Square (SQ), PayPal (PYPL), Stripe (private) and Plaid (now Visa) should have been large bank innovations. OK, that is not entirely true. Large bank cultures don’t promote innovation. Innovation is rarely driven by incumbents. Other interesting companies exist for banks to acquire. Those interested may reach us at firstname.lastname@example.org.
Growth has lagged at Citigroup since Sandy Weill retired. Outgoing CEO Michael Corbat has held the CEO Chair since October 2012. The stock is up 70% over that eight year period and revenues declined by 3% over the same period. Unacceptable.
Innovation comes in all shapes and sizes. Innovation does not necessarily have to involve the creation of a new technology product. Building or acquiring an adjacent business could be the spark of creativity that enables a company to accelerate growth.