The announcement that Bank of America is going to invest in an MIT lab to invent the future of banking was reported by Colin over at BankWatch. He suggests he needs to be convinced of the value of lab based approaches to solving banking problems. Interestingly, someone who identifies as from the Centre of Future Banking – the new lab – also pointed to this announcement in a comment on my "Hard problems in banking" post.
I am a very great believer in academic labs and the ways that they can be leveraged by corporates – there are simply too many success stories out there to ignore. But my hesitation in this case is mainly because I know that dreaming up the "future of banking" is not the hardest part. The hardest part- by far – is getting anyone to agree that what you’ve dreamed up is worth doing. I addressed this point in my post recently on the "Escape velocity of ideas".
In my previous comments on this (see this), I guess my point was that when bankers come up against hard problems, it would be great to have clever academic minds that focus on hard problems to help out. In those cases, we knew how to define the problem, just not how to solve it.
I once had the chance to listen to some innovators in Bank of America talk about their stage gate process, so I know they have a robust methodology behind them. But with a brief as wide as the one that MIT have, I can’t help but wonder how much of the future will actually be able to be invented in isolation from the rest of the industry.
It seems to me that the systemic issues that lead us to consider the future of banking in the first place are industry, rather than specific bank, issues.
Naturally, if MIT invent some killer new channel or product for Bank of America, we’ll all be thrilled to rush in and copy immediately.
Financial services innovations tend not to have very long-lived competitive advantage. To a large degree, thats because the most important things that happen tend to be industry wide (in which case they are automatically replicated by everyone, such as faster payments in the UK, or SEPA in Europe), or there are such low barriers to entry that anyone with a mind to do something can (think of the meteoric rise of peer to peer lending, after the initial seed was sown by Zopa).
Anyway, given all the above, I’d like to thank Bank of America and MIT for investing in research for the benefit of all of us. And if there is anything we can do for you in return, please, just ask.