Innovation in technology is not just about having a new idea, but also about making it work. The impact of smart phone take-up is being felt by the banking sector and retail banking has seized the opportunity that mobile offers to expand traditional business models. It has recognised that Generation Y is becoming fiscally responsible and that these digital natives will expect their banks to have embraced mobility.

Mobile banking is perhaps an obvious progression for the retail offering, but mobile technology, and the subsequent trend towards mobilising business processes, is just one of the innovation issues the financial sector should be addressing. How can other areas of the financial services sector best use new technologies and make existing systems work better? This will be a particular challenge for IT departments, but banking has traditionally been good at innovation and process improvement. Technology has repeatedly changed the way banking happens; from the Big Bang of the 1980s, through ATMs and debit cards, to this century's online banking and peer-to-peer lending (predicted to be $5 billion by 20131). In the next decade, the cost of maintaining high street branches, the necessary decline of the hub system of bank services, mobile banking and the effect of social networking are all issues to which banks must find a response. 

Gartner reported at the end of last year that, "banking and investment service providers need to make a critical shift to a more outward-facing set of objectives for IT that are risk-aware, but still innovative and bold". These new developments could have a game-changing impact on established financial institutions and a tactical, cost-cutting use of technology will not be enough. Neither is this about technology as a quick route to new, but unsustainable, products. Rather than focussing on specific products, banks should develop innovative technology to create a better way of banking, of communicating with clients, whether retail or investment, and respond to the challenge of new entrants into the financial services world. Transformational and innovate projects could refocus and rebuild banking, and lead to positive growth prospects.

How to establish these new ideas and make them work will also be critical. Investment bankers could use mobile technology to gather, process and act upon information. Corporate banking is perhaps well suited to social networking because of its information requirements and real-time demand. Retail banks will have to address issues of security and regulation. But making these ideas work may well involve partnerships or alignments between banks, credit card companies and telcos. The trend for mobilising business processes may mean joining forces with mobile phone manufacturers, network providers and internet companies to create a service, not just a sell. If banks are going to transform themselves and embrace the new financial world, it will mean taking a strategic and innovative approach to technology.

Recent Datamonitor research for BT also cites the importance of technology as a general business driver, concluding that "greater investment in IT by businesses will help aid recovery in the wake of the anticipated economic upturn". Despite this the Gartner report reveals that half of the banks it questioned will not have a budget or programme dedicated to technology in place by 2013.

The financial sector must seize the opportunity to bring technology out of the back room and into the boardroom. Innovative technology and clever implementation should be key components of the bank's strategy for the new decade. Properly funded and resourced technology will enable our financial institutions to adapt to what Gartner describes as the "new normal" and thrive in this changed economy.