A collaboration between i2c and PYMNTS.com
When it comes to innovation in payments, the hip new alternative finance players — from Bitcoin-based startups to Lending Club to Venmo — get much of the press. In fact, hardly a week goes by without an article on cryptocurrency in the Wall Street Journal, and a hardly a day goes by without one in tech media like TechCrunch.
They have benefited enormously from innovation led by FIs over the last decade, from ATMs that provide an increasing variety of services to mobile banking, one of the apps types most commonly used by smartphone users.
Of course, very large banks, such as JPMorgan Chase, have the money to invest in innovation. They can grow their own or buy companies, such as up-and-coming FinTechs, to introduce new products and features to their customers. The majority of FIs, however, are relatively small. The 25th largest FI in the U.S. in 2016 has assets of $116.38 billion. As of June 2017, there were nearly 11,565 FIs with fewer than $116 billion in assets, and they accounted for just 28.1 percent of total bank assets.
Between being traditional and simultaneously lacking the deep pockets of a large brand, one might think FIs outside the Top 25 innovated about as often as the local taxi company. But, we surveyed financial institutions about innovation — defined as both the implementation of wholly new products and new features for existing products — and the results show that view is quite wrong.
We conducted a detailed survey of payments executives at FIs to study payments innovation in these institutions, excluding the largest 25 U.S. banks. We obtained a sample of 214 respondents representing the complete size distribution of various types of FIs throughout the country.