Evolution of Product Innovation in the AI Era

Jim Marous (00:11):

Welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous. Product innovation and banking faces significant challenges, including legacy systems, regulatory constraints, risk aversion, and the need to balance digital transformation with traditional services.

Jim Marous (00:31):

In this episode of Banking Transformed, we explore the dynamic landscape of banking product management with Puneet Chhahira, VP and head of product management and marketing for Infosys Finacle.

Jim Marous (00:43):

Our conversation reveals how financial products are evolving beyond traditional services to meet changing customer expectations and technological possibilities.

Jim Marous (00:53):

Puneet shares valuable insights into how banks can foster innovation cultures, accelerate digital transformation, and effectively implement AI technologies to enhance both product development and customer experiences. We also discussed the critical role leadership plays in driving these changes and how banks can balance technological advancement with human-centered design principles.

Jim Marous (01:21):

It's time to reimagine banking products as comprehensive experiences that integrate seamlessly into a customer's financial life. Our guest will offer practical strategies for financial institutions looking to stay competitive in an increasingly digital marketplace, and you'll provide a compelling vision for the future of banking products in an AI enhanced world.

Jim Marous (01:43):

So, Puneet, you've been with Infosys Finacle for almost 20 years, and how have you seen the fundamental nature of a banking products change through the lens through the years that you've been there? And what does it mean for how finance institutions approach product management?

Puneet Chhahira (02:02):

Thank you, Jim. And first of all, thank you for having me on your show. It's a privilege and it's a very pertinent question to begin with. Product management has evolved significantly as far as banks and financial institutions are concerned.

Puneet Chhahira (02:17):

The best way to look at it, to my viewpoint is to look at from the way consumption has evolved, if we just roll back what used to happen 25 years ago, irrespective the country or the community of financial institution served, we had significant amount of customer onboarding, engagement servicing happen in assisted channels.

Puneet Chhahira (02:39):

There were branches, there were ATMs call centers relationship managers. Fast forwarded to today, pretty much everywhere in the world, the bulk of the engagements have moved to digital self-service channels. So, for common things like making a bill payment, sending money to a friend nobody needs assistance.

Puneet Chhahira (03:00):

For more complex journeys, also, journeys like taking a loan or even taking a mortgage, you see more financial institutions have a large part of those journeys also becoming digital. I would like to call it digital stage one, which we all have familiarly seen almost consistently in various markets.

Puneet Chhahira (03:24):

But there's something else happening which is happening faster than this wave, which is a lot of these interactions, engagement are moving outside bank owned devices and channels into what you may call open finance, embedded finance world.

Puneet Chhahira (03:40):

And it's driven both by industry initiatives, individual financial institution initiative, and to a certain degree by regulatory initiatives as well. And what it means is a lot of these journeys are now originating in third-party channels. Some of it could be the partners financial institutions choose to partner with. Some other could be coming from the broader open plans umbrella enabled by regulators or the industry policies.

Puneet Chhahira (04:09):

And this is happening at a different speed in different markets. I'm joining in this call today from Bangalore, India, and if I look India as a reference particularly when it comes to payments, this country adopted the open payments nearly nine years ago. And today, over 95% of those open payments originate outside the bank owned apps.

Puneet Chhahira (04:35):

But this is not limited only to payments. Today, we have seen across markets, various other products such as lending, buy now, pay later, has been area of interest for many countries, many financial institutions over the last 20 years now. And we see it happening in deposit side. There are lots of marketplaces coming in where people can take deposits seamlessly.

Puneet Chhahira (04:58):

Pretty much the way we bought mutual funds, go to a broker of a choice and choose the fund which you would like to invest in. It's a similar way. And with the deposit insurance in all countries, you end up commoditizing some of these products.

Puneet Chhahira (05:13):

So, if you look at this frame of customer engagement and transactions moving from not just self-serve branches to self-service channels, but also outside the bank, you start thinking what this product evolution look like.

Puneet Chhahira (05:27):

It is mirroring pretty much the same thing. Traditionally we would think as a product manager has to imagine what each of their customers or customer segments would need and craft out a product and then push it out in the channels bank home.

Puneet Chhahira (05:43):

Today, the process is changing. The product managers are working with brands. So, now when Apple launch Apple savings account, Apple product managers have say, apart from Goldman Sachsin deciding the way they would like savings account to be differentiated, whether with JPMorgan Chase savings account or any other financial institutions savings account.

Puneet Chhahira (06:04):

Another thing which is happening is more and more product managers realize that they have to empower the end customer, and thus they're saying how can the customer design a product. Essentially, if I'm taking a loan, today increasingly, product managers are willing to say "Under certain guard rails, I would like customer to design these payment schedules."

Puneet Chhahira (06:24):

If a customer wants to take a vacation in June and does not want to pay an EMI at that time, sure you can have a payment ... customer can choose while taking the loan itself. They're giving flexibility. You're a business, small business, you don't operate on Sundays. No worries. We'll create products where we don't charge you interest on Sundays.

Puneet Chhahira (06:44):

Now, a lot of this is economic models as well, but when you think it from a lens of the product manager perspective, you start seeing various patterns. How do I move product definition as far as possible towards the end points, which is customer or brands. You start thinking, how do I make personalization as far as possible? So, those are the fundamental shifts I believe, which are happening in our industry, and it's all very exciting.

Jim Marous (07:10):

Well, it's interesting. You've done a report with us on innovation with Qorus and with Infosys Finacle for over a decade, and things continually evolve. But what's interesting is innovation is often cited by banks as being critical for their existence.

Jim Marous (07:30):

Yet at least I see and your report has shown that many struggle to move beyond what I'll call incremental improvements. And based on your experience at Finacle, what separates the truly innovative finance institutions from those that maybe just talk about innovation, but don't really implement it in real time?

Puneet Chhahira (07:53):

Excellent question again but a tricky one, Jim. If we think fundamentally, and I'm a big believer in that. It is about culture. It's about compounding. So, if you ask me what separates between innovation leaders and fast followers and mainstream and rest of the laggards, I think how strongly they have built organizational capabilities and culture to do it on a scale.

Puneet Chhahira (08:21):

Most of these institutions and we have an opportunity to work with many in our business. We work with clients in over a hundred countries. So, almost all the innovation leaders, they treat innovation as a core business. It's not about a lab. It's not about innovation days. It's not about select colleagues working on the program.

Puneet Chhahira (08:41):

It is about how do you make it mainstream where everybody's empowered in a certain way and is participating in the process and take great amount of ownership in doing so. And when I think of it, we developed a framework along with our clients on how it looks like. And for the simplicity, let me make it at a three level framework. The first piece is clarity at the top. Everybody in those organizations have an understanding of where we are going. Why do we exist? What is our organization purpose?

Jim Marous (09:17):

I'm smiling because we just finished our annual meeting, the Financial Brand forum, and there was so much talk about that North Star that if you don't know where you're heading, you'll get misguided. And it doesn't have to be where the financial institution is going as far as the entire organization, but with the part you're trying to deal with, the part you're trying to fix, you need to really know your North Star, or you won't achieve it. And you just brought up the fact that you have to first determine where you're going.

Puneet Chhahira (09:49):

One cannot underestimate the importance of that, particularly when we have to take large organization together. And thus, that North Star is absolutely important, Jim, and I think in all our clients where we see consistently great work happening, we see that.

Puneet Chhahira (10:05):

The second layer, which I typically think in these organization, which exists, is the building the organization capabilities. It is not the on and off switch. It is like building a muscle, going to a gym. And for that I have typically seen the three things which come together.

Puneet Chhahira (10:21):

The first and foremost, the people and culture. How do they go about the staffing their teams? How do they go about staffing their programs?

Puneet Chhahira (10:31):

Second piece is what kind of processes they have put up in the organization. For example, funding processes. An organization which does annual funding is going to lag behind because innovation needs to happen on an ongoing basis. That means you need to have funding capabilities available, milestone-based funding capabilities available.

Puneet Chhahira (10:52):

The other piece is of course, technology and data. You need that foundation to start allowing people to imagine what is relevant for customer today, the key jobs customer wants to get done with a financial institution or in their lives where financial institutions can play a role.

Puneet Chhahira (11:09):

Once you have this enablement, then that's when the third layer comes to life, which is more visible. The first two layers are relatively less visible. They're essentially the supporting pillars. Then come the third layer, which is about how quickly you do innovation and take this to market.

Puneet Chhahira (11:26):

We see it in form of product and services launched. We see it in the form of experiences innovation, which the institutions do. We see it in the form of ecosystem innovation, the partnership embedded finance, we do.

Puneet Chhahira (11:38):

Now, very often difference between the leaders and the laggards is leaders go through this entire nine yards, which we discussed the three process consistently and stay with for years together and lessen a successful institution, get very quickly gravitated towards very specific innovative initiatives. And this doesn't happen at scale.

Puneet Chhahira (12:03):

If I can quote one example, we work with a bank called DBS Bank in Singapore. Very, very renowned for their innovation. Consistently rated the most innovative banks by various agencies, won variety of different awards. And when you meet their executive team, and their transformation journey started somewhere in 2010, and we are 15 years since then.

Puneet Chhahira (12:30):

You see the CEO, Piyush, who has just retired last month, had a vision, which vision evolved, never changed for all these years. It gave people the North Star they needed. And they call themselves as 5,000 people startup. I don't remember the exact employee base, but whatever is the employee base.

Puneet Chhahira (12:51):

And this has happened because this is the kind of framework they use in building the culture. How do they empower everyone? How do they train everyone? Even though colleagues who have been in the bank for 25 years, and at a certain way of doing the things, how do we pair them with startups so that they change their way of looking at customer problems and solving for it consistently?

Puneet Chhahira (13:13):

So, there are a lot of remarkable examples which I believe exist in the market, which showcase that it's essentially a excellence journey wherein you have to invest years together, not just days and months.

Jim Marous (13:30):

It's interesting, Puneet, you mentioned it first and, and it's something we take for granted. But you're a technology company, but the reality is, technology alone, investment in technology alone, or any of the operational aspects of it, will not get you to the finish line. It really becomes a culture and leadership issue.

Jim Marous (13:52):

And I think your organization, when we've done the research with you, we've seen it more and more that there are some amazing, smaller organizations that are achieving massive amounts of innovation because their leadership has it in place.

Jim Marous (14:08):

You can't buy yourself into innovation and progression. You need to actually believe in it from the top down and from the bottom up. And that's one of those cultural things you mentioned. And I think it's so important that to move forward, to be resilient from a product standpoint, from an innovation standpoint, financial institutions really need to understand that it is the speed, it is the scale, it is the resilience you build, but you've got to build it from within before you buy the technology.

Jim Marous (14:41):

Because again, you won't know your North Star if you don't have the leadership that helps guide that process, and you won't know if you've actually done it. And one of the things that our report that we do together continually looks at, is the whole digital transformation journey.

Jim Marous (14:59):

Where would you say that most institutions stand when you look at the current state of digital transformation? Are they still in the early stages, or are they made the necessary pivots to be able to keep up with what's necessary? We know that digital transformation is not an endpoint, it's an ongoing process.

Jim Marous (15:17):

But where do you see them? Because I know we see when we do the research with you, that more and more organizations grade themselves harsher than they would've in the past. They kind of know what is needed. But when you're looking at them and when you're trying to see where are they in the lifespan and the maturity scale, where do you see the majority being right now?

Puneet Chhahira (15:42):

It's an excellent point. And Jim, as you know, for last many years, we have researched on this topic. And essentially the question we typically ask is, as they reflect on their digital transformation, where do they see themselves?

Puneet Chhahira (15:56):

And you are absolutely right. Financial institutions are reasonably critical about their own journey. And over the last many years, I think this question has been around for 5, 7, 8 years now. Only a small minority talks about that they believe they have deployed digital initiatives at scale, and it is delivering as per expectations.

Puneet Chhahira (16:18):

And this year's number was 11.5% institutions only then the majority and it is nearly 30 percent says they’re deployed initiative at scale, but not delivering as per expectation. And then the highest majority which is 40%, says that they're midway in that deployment.

Puneet Chhahira (16:41):

Now, very often when this data gets presented in sometime in discussions with many stakeholders, it seems like some people believe that financial institutions have not done much. I tend to actually disagree. I believe it’s not that financial institutions are not doing enough.

Puneet Chhahira (17:03):

Frankly, every board I know of, every management team I know of in the last decade has put in immense hard work in getting their organization digitally better. It's just what's happening is the pace at which they can evolve and the pace at which goalpost is moving, that's different.

Puneet Chhahira (17:21):

The goalpost is moving really, really rapidly. And in order to even stay static, you have to run. And that's what gets reflected in these surveys. And when you start thinking about it, we have talked about in our research business models, when we started it, everybody started digitizing the existing business model.

Puneet Chhahira (17:44):

Then came the learning saying that, no, you have to reimagine with a digital first. But still, the conversation was, I will be the service agent. Now when, what we just talked about a while ago about open finance, that requires yet another reimagination, it's a good example of how the goalpost is moving in our world. And same is on many other dimension.

Puneet Chhahira (18:08):

We are only talking about today in product and services. But if you think of from operational perspective, the cost, takeout the expectation boards have on executives, they're tremendous. I mean, when I started in banking software industry near 2005.

Puneet Chhahira (18:26):

Prior to that, I came from broader financial services. My last assignment was with the insurer. When I looked at the cost to income ratios, what was seen credible in the market, and different regions have different benchmarks considering essentially the cost of physical infrastructure and the people is very different in different markets.

Puneet Chhahira (18:48):

So, it was respectful to have 50 to 60% as cost income ratio. Over the years, 40 to 50 became the right benchmark. And if you touch Europe, it is massively aspirational for most institution, U.S. and Asia Pacific is better. Asia Pacific is of course, much better because of still the different kind of growth dynamics available.

Puneet Chhahira (19:11):

And then when you start thinking from what we talked about from a product perspective, that we have to move things to the customers, there is so much that needs to change and so many goal post shifting. I think it all comes together in that research finding. And as you rightly said, when you started, it's a journey.

Jim Marous (19:31):

Yeah, it certainly is. And it's interesting because in certain senses, we've got the mobile app down. Unfortunately, there's very little differentiation as to how these are deployed.

Jim Marous (19:45):

But I think, what's interesting, the customer's expectation because of things around financial institutions are so accelerated because so many different industries are embracing digital in a way that it's a little bit more difficult for financial institutions, for a regulatory standpoint, compliance standpoint, risk, all these other elements.

Jim Marous (20:07):

But I think a lot has happened. However, we continue to see in other research that we do is that some basics still are not in place. It's still, in many cases, very hard to open an account anywhere in a quick, easy, mobile way. We make it more difficult than it needs to be. And to your point, the ability to build a relationship and make it so a person can add accounts, subtract accounts, transfer money, we still have too much friction in that.

Jim Marous (20:37):

However, when you look at the overall transformation journey, they've certainly done a whole lot better. We can't get to a conference or any other event right now without generative AI or AI coming into the conversation. Beyond the hype, what are you seeing as the most promising applications of generative AI, especially when you look into the product development area?

Puneet Chhahira (21:05):

It's an interesting question, and Jim, as you said everybody has eyes on generative AI. And we are using a lot of generative AI internally within our own organization and working with our clients on variety of different areas.

Puneet Chhahira (21:20):

And I think there are some patterns which are very clear. First of all, most organizations are working on enterprise use cases and then follow it up with the customer use cases. So, it's not uncommon to see use cases which are designed towards productivity to begin with.

Puneet Chhahira (21:39):

You would see a lot of knowledge management related use cases coming in wherein you put gen AI based co-pilots and make them answer the questions, which may be complicated sometime around products conditions, sometime about regulation in certain market, sometime just to support the customer queries, like what are the eligibility rule for a product X in a specific country or in a specific segment and what kind of documents I need if I have to onboard a customer for a specific service.

Puneet Chhahira (22:12):

Second use case, which is fairly common, is how do you use it for software development lifecycle, not only software companies like ourselves, you are using it. Clients who also develop software or extend software are using it extensively, and it is across the lifecycle.

Puneet Chhahira (22:28):

The way they carve out the requirements, the way developers develop, the way validators validate the way performance testing related work is being done. There is a lot of opportunity.

Puneet Chhahira (22:42):

Increasingly, we have focused a lot on this, and I see a lot of our clients are doing as well. When you think of a digital perspective, some pieces of our business evolve more rapidly. For example, mobile experience expectation, evolve or online portal experience expectation evolve more rapidly than what evolves in the middle office, in the back office.

Puneet Chhahira (23:02):

And traditional life cycles of coding mobile apps, whether through code or through low code platform, took certain time and effort. We see increasingly, people applying gen AI and creating that rapidly so that one can continue to innovate on the customer side using the generative AI, yet not exposing directly generative AI to customer directly because it's still a app generation.

Puneet Chhahira (23:28):

The third thing which we see more often is conversational experiences. I think, everybody's experimenting and that's not new. Intent-based conversational experiences have been around for nearly a decade, and various banks have had those initiatives.

Puneet Chhahira (23:42):

Now they're getting expanded with the generative AI based capabilities which are more conversational and more person like, and one can use that to say, how can I tweak a deposit product or a loan product, or negotiate a price in some cases, then start becoming more interesting work, which is saying, can I put generative AI a little bit more closer to the customer?

Puneet Chhahira (24:07):

Can I put generative AI to change the offer, change the campaign, which I'm sending it across to them. Now that's an area where most of the times are making certain kind of controlled environment. It's not at scale at this moment, but I think it's only a matter of time.

Puneet Chhahira (24:29):

A lot of our clients, which we know of, in fact, we have developed our own small language model. We are among the few companies who have done that because we wanted to restrict the training material with which we build our models, because a lot of derivative work which you're going to do depends on that. We see a lot of our clients doing that in their environment.

Jim Marous (24:49):

I know the research we did with you showed that a lot of the use of AI and generative AI is really back office based. It's in automation, it's in cost containment, it's in functionalities. And as you mentioned, we're just now starting to see organizations dip their toe in the water around personalization, around improvement of the interaction between products, things of that nature.

Jim Marous (25:14):

It is where the growth's going to be. It's going to get down to very much as your first response to my question was earlier, around a culture and leadership and the ability to embrace the risk that comes with that, because it not risk from a fraud and, well, there is that also.

Jim Marous (25:32):

But the risk of making the wrong recommendations, things that financial institutions have a really, I think, a way out of scale concern about where if you look and you talk to the customer and you let them know you're actually looking out for them, they'll allow you some freedom as far as maybe making an error.

Jim Marous (25:54):

It's just a matter of what organizations are going to do that the best. And you mentioned earlier, you can name probably on one hand, maybe one and a half hands, the number of truly innovative organizations. It's going to be them first because they're already in that space. They're already talking to consumer a lot.

Jim Marous (26:11):

They're already deploying information out in the field based on the insights they've captured through different data sources. It's going to be interesting. And I know your leadership has recently come out and said that you're going to be doing a lot in the generative AI and AI space as well, didn't they?

Puneet Chhahira (26:28):

Absolutely. And one thing I want to actually add and I'm a little old school, Jim. I think it's important to not underestimate the power of predictive AI. I think while there is a lot of hype around generative AI, in our industry, there are a lot of use cases which are around forecasting outcomes. What is the prediction of a customer defaulting? Can I engage with them and make a better offer?

Puneet Chhahira (26:54):

And we are doing this kind of work with that clients, particularly in MarketSpace, very popular. The recommendation on the right offering to be made the recommendation on engagements. So, I think, financial institutions who have built that muscle of having a strong data strategy and data platform, building a lot of machine learning based predictive AI capabilities, and now adding generative AI capabilities on top are likely to succeed again further.

Puneet Chhahira (27:22):

Again, not everything will give us a leapfrogging ability. Some of it'll still require good old hard work. And I believe all the institutions which are getting the outcomes they want are ones who have been on this journey for long, and generative AI has only accelerated that. It's not like it's switched on something and doesn't require still the great data platform foundations and great predictive AI capabilities.

Jim Marous (27:53):

Well, I think you brought up though is that it's really taken this predictive AI and saying, there are so many signals a customer gives us on how to help them with their wellness journey. And we don't have to get really, really deep in the data to find out that a customer needs some help on a loan side, or they're doing something on a repetitive basis that we can help streamline that operations.

Jim Marous (28:20):

When you look at it, it really gets to understanding from a product management standpoint, the balancing of technology with human needs or with the use of humans in the process. How can banks ensure that they're building products and services and engagements that leverage both the technology while still making it so the human aspect becomes valuable?

Puneet Chhahira (28:47):

No, that's an excellent question. I think, by the time we always start from customer first, we'll not miss the bus. I think more and more organization I know of, they're starting with the really understanding what are the customer's jobs to be done.

Puneet Chhahira (29:05):

In fact, if I look at our own organization purpose statement, we have defined our role as we are the software providers, as you know. We have defined our role purely from a purpose perspective, saying that our job is to create software and SaaS services so that we can help our clients, which are financial institutions engage, operate, innovate, and transform better using a modern technology platform so that they can help their customer, save, pay, borrow, invest, and insure better.

Puneet Chhahira (29:40):

Now, the reason we did that is because we learned from all our customers that everybody who got their North Star right, is thinking about, "My job is not to take this deposit product to the customer in a most convenient way. My job is to help her save better, borrow better, invest better, ensure better, pay better."

Puneet Chhahira (30:05):

And when we start looking at that dimension, it just opens up so much more I could do in that their daily journeys or their business lifestyle. And thus, we end up working with clients who today are working with the hundreds of partners.

Puneet Chhahira (30:20):

And when I say it, I'm not joking, I'm not just saying from the exacerbation points, we have clients who are processing 2 billion API calls a day. Sorry, 200 million, my mistake, 200 million API calls a day. And that's happening simply because they're seeing their purpose as embedding themselves into their client's journeys. And if I look at those clients, more than 60, 70% of these API calls are not originating from anything in their network.

Puneet Chhahira (30:53):

That means it's not done through their online banking, mobile banking branches. It is all happening because they have chosen to make it a part of customer and financial life. And when you start with that, you start humanizing it because you get so many partners along the way who are working in that context.

Puneet Chhahira (31:13):

And thus, you are not losing that context. You are making yourself available in the context. And my personal belief is every time we see it from that customer the first level journey or the primary journey customer is having of buying something on Amazon or buying a home and then integrate financial services in that life, it becomes so much more easier to have that balance right.

Jim Marous (31:39):

It's interesting because the research really shows that if we can help the consumer along their journey, we're going to benefit. It's going to pay off. It may not be an immediate payoff, but it's a longer-term growth relationship.

Jim Marous (31:53):

And it's going to be making sure also that we can find ways to actually, and you referenced it, build engagement, which is part of that human aspect where we're able to say, "Okay, how do we build the back and forth?" It's not, not necessarily the best to make it so we have the fastest engagement, we get them in and out as quickly as possible.

Puneet Chhahira (32:15):

The consumer wants that discussion, they want the help, they want the handholding, even if it's done with chat bots or something else. But we find a lot of organizations are building tools to increase the overall engagement, which is key, because at the end of the day, if they just do something, move on, they may be moving on to a competitor, to an organization to provide another service that we could, in effect provide.

Jim Marous (32:41):

It's interesting when you work with organizations around their product strategies, what do you see as the largest obstacle, the challenges that they have? Because we can go around the world and we pretty much from organization to organization know what their product suite is going to be, know how it's going to be engaged with, know how the transformation of the journey is going to take place.

Jim Marous (33:07):

But how are we finding this to be disrupted? What is the challenge to actually building innovation that goes beyond simply those incremental things? What are you seeing being done that makes it so that organizations maybe are building a relationship model rather than a product model? Something different overall.

Puneet Chhahira (33:29):

Jim, I'm going to refer back to the model I talked about of successful innovators. And I think it's 180 degree different. When you think of challenges if you were to look at three most common challenges on the culture side, I think it's very much about very siloed structures. And if I can say a little bit of force.

Puneet Chhahira (33:46):

When product team, business team, technology team, risk teams, operations team live in their own disconnected silos, guarding their own individual KPIs, that's when the innovation breaks. Because the idea is to have client oriented KPIs and then reflecting back onto all these functions, which are absolutely required to make the business work.

Puneet Chhahira (34:13):

In fact, I have known a client leader, and that leader has been the leader in the industry for over 25 years. He had this amazing model. You and I go to many conferences, and this leader, he was the chairman and managing director of a large bank.

Puneet Chhahira (34:32):

Every time he attended a conference, if he found something useful, he'll come back and has put together a cross-functional team and give them collectively one target, 90 days, I would like this product in some form to be available.

Puneet Chhahira (34:48):

Now, suddenly the risk team is not talking about why it is not possible. The risk teams are talking about what we need to make it possible. Compliance teams are not essentially saying, "This is the compliance requirement, and thus we cannot do this." They're saying, "How do we engage with regulators wherever required to make sure they understand what we are trying to do and how it is aligned with the spirit and make sure that it gets done."

Puneet Chhahira (35:14):

So, to me, the first point is essentially about solving for the talent and the culture and bringing this cross-functional teams together.

Puneet Chhahira (35:24):

Second point is about technology and data. In most organizations, that's what we see in the survey, technology becomes typically the number one villain why teams are not able to innovate. I think we have kicked the can for far too long. Even though we have done a lot of digital transformation, there is not enough being done on back office systems in particular.

Puneet Chhahira (35:49):

And today's the topic which we're having. I think it's important topic because a lot of last 10 years differentiation was focused around experience. We all talked about great mobile apps, new features, new journeys on those apps. But as we start having parity in that area, the differentiation is about product innovation.

Puneet Chhahira (36:11):

Can you allow your brands partner to create a product which is tailor made for their context? Now, all this will require underlying technology teams, systems to be available to pass on that empowerment. Today, bulk of the banks, particularly in North America and Europe are on very, very legacy platforms, and that's where they typically get stuck.

Puneet Chhahira (36:35):

The ability to make change is so slow. Many of the innovative initiatives don't see light of the day until it is already becoming a commoditized capability.

Puneet Chhahira (36:47):

The last piece is about the slow decision-making processes piece we talked about. Again, if you don't pass on the empowerment towards the end points, if you don't make it funding available at the speed at which innovation is expected to work, chances are you're going to suffocate.

Puneet Chhahira (37:08):

So, if you put endless governance layers of committees, which are going to approve every evolution, I think it's going to be difficult. And most institution I know of, they have multi-speed models. They have certain areas which require significant governance, and they're carved out. And there are certain areas where they made the pathway easy. The runway is much easier for anybody to take a flight.

Puneet Chhahira (37:35):

So, I think if, these are the three things I would say, how do you take care of culture? How do you cut silos? How do you build the right muscle and technology and data so that innovative ideas don't take months and years, but days and weeks. And finally, how do you organize your governance processes, approval processes so that teams which are closer to the customer can move fast.

Jim Marous (38:00):

So, Puneet, our last question. Looking forward, one to three years from now, what excites you the most about the banking industry and where it's going, where product innovation may go? What do you expect the report that we do together to show in maybe the next one to three years? Because we used to say 3 to 5 or 5 to 10, but we can't figure out what tomorrow's going to bring. So, what excites you about the near-term future?

Puneet Chhahira (38:29):

Jim, I'm going to say a few things which we already discussed. I'm very, very excited about what embedded finance revolution will bring to our industry. I believe it's some win-win-win situation as far as financial institution brands we are going to partner with and the end customers are concerned. So, I'm super excited about what that will bring.

Puneet Chhahira (38:48):

I'm very excited about what kind of innovations we'll see when customers can tailor the products in their context. We have seen a lot of great innovation when product managers have been innovative. We have seen great innovations where brands have come together. We're going to increasingly see a lot of customers through driven innovation coming in. That'll be a remarkable thing.

Puneet Chhahira (39:16):

I'm also excited about how the personalization would move to a very significant different place. We have talked about, it's been an evergreen topic, all my years in building software, we have talked about segment of one.

Puneet Chhahira (39:32):

Now it is going to come to life now because with AI and gen AI, we can absolutely mass personalize products and services. So, I'm very excited about what kind of interfaces which we have, the way we engage with our banks the kind of personalization capability on product and pricing that will power pass on to the clients and see it happen at last mile.

Puneet Chhahira (40:01):

So, if I look at the entire journey of how we onboard a customer, engage them, service them selling to them, all of those aspects are significantly getting evolved with what is art of possible today. And I think it must be the most exciting time in our careers, I would say.

Jim Marous (40:22):

You know what? I said that at our event a couple weeks ago, and I agree totally. I don't think banking's potential has ever been so great. It's going to be a matter of just deciding are you willing to go there? Because a lot of this can be banking in a very different way. We've talked about it forever.

Jim Marous (40:39):

But I think the reality's going to hit us that if a financial institution doesn't provide that higher level of personalization, the higher level of engagement, the higher level of actually feeling like my financial institution is looking out for me as a person, I will find that capability in other ways.

Jim Marous (41:01):

We've already seen it certainly in Europe where while even in an open banking environment that's been open banking for quite some time, people are individually building their own open banking platform within their financial institution and saying, "I'm going to pick one from here, one from there, one from there."

Jim Marous (41:18):

But somebody's going to put this all together where they all talk together easily in a way that makes it so that I don't have to wake up every day saying, "Okay, what do I have to touch now? What do I have to shift now that it's going to be automatically done with my permission?"

Jim Marous (41:33):

Not everybody's going to want their banking that way, but I think as trust is built, as organizations prove their worth in being able to develop these innovative tools and capabilities and integrations in an embedded way, it's going to make my day easier. And I'm looking for any possible way I have to take time out of my day and give it back to me. So, I think this is going to be the key.

Jim Marous (42:00):

So, Puneet, thank you so much for being on the show. And I'm going to reference, again, everybody who's listening, make sure you look at the episode notes and download the innovation report. I know it's been over 10 years. I think we're 12 or 13 years now. We've done this innovation report together.

[Music Playing]

Jim Marous (42:16):

And it really digs deeply, not just into innovation, but digital transformation, cloud banking, technology. It covers the gamut. It covers a lot of territory, and it's a global report. It's not just Europe, it's not just the United States, but it shows you global differences.

Jim Marous (42:32):

And I think, there's a lot of excitement there. We didn't even talk about cloud banking, but the reality is, while that was a top item three or four years ago, it's pretty much a, everybody's got it. We're okay. I'm just hoping we can do the same thing with AI in the next two to three years. So, Puneet, thank you very much for your time again.

Puneet Chhahira (42:49):

Thank you, Jim. It has been wonderful working with you for all these years and lovely to be on the show again. Thank you for your time.

Jim Marous (42:58):

Thanks for listening to Banking Transformed, the winner three international awards for podcast excellence. If you enjoy our work, please give us positive review. Also check out my recent articles on the Financial Brand and our fantastic research for the Digital Banking Report.

Jim Marous (43:15):

This has been a production of Evergreen Podcasts. A special thank you to our producer, Collins Blakely, audio engineer, Chris Fafalios, and video producer Will Pritts.

Jim Marous (43:26):

Finally, if you've not already done so, remember to subscribe to Banking Transformed on both your favorite podcast app and on YouTube for more thought-provoking discussions on the intersection of finance, technology, and leadership.

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