With banks desperate for fresh thinking, the Citi Mobile Challenge is a small but welcome bit of progress



Large incumbents in every industry struggle to innovate. There’s a whole shelf in most bookstores dedicated to this “dilemma.” Last summer we produced an entire series called “Dancing Giants“ about the lengths established companies go to to contort their organizations to foster more innovation – at least in the cases where they’re willing to admit they have a problem.

In some cases this means launching incubators, accelerators, and skunkworks labs. In others, it means acquihiring a bunch of fresh, young, startup talent and hoping to infect the larger culture with this way of thinking. But across the board, it’s clear that once a company gets above a certain size proactive measures are required to avoid becoming the disrupted, rather than the disruptor.

One industry that desperately needs such innovation is the financial services sector, where decade old companies like PayPal, fresher upstarts Stripe and Square, and out there concepts like bitcoin and crypto-currencies have all threatened to unseat the traditional banking giants. Regulation and sheer scale have allowed the giants to remain atop the industry – and in many cases grow, partly due to post-financial crisis consolidation – but the drumbeat from consumers is growing louder that fresh and modern products and services are long overdue.

It’s with this as the backdrop Citi has announced the inaugural US edition of its Citi Mobile Challenge. Across three dates in November, the bank will host events in San Francisco, New York , and Miami inviting select teams to present their ideas for improving digital banking. Judging the competition will be so-called decision makers from Citi’s Digital Banking, Technology, Operations, and Citi Ventures divisions. The banking giant recently completed a similar challenge in Latin America.

There will be $ 100,000 in prize money available, with $ 50,000 going to the finalist deemed the most Innovative Mobile Solution and $ 50,000 going to the best Internet of Things/Wearables concept (up to two teams may be selected to split each of these awards, Citi states). All finalists chosen by the judges will be invited to pursue a commercial relationship with Citi and will have the opportunity to further incubate their ideas within Citi’s “partner accelerator programs.” Registration for the challenge closes at noon ET on October 3.

It’s not just coming up with innovative new customer experiences to compete with the likes of the newly launched Apple Pay, PayPal OneTouch, and Ripple instant settlements that should keep bank executives up at night. The entire industry needs the equivalent of new plumbing to get up to date with today’s security, reporting, and regulatory requirements.

London based blogger, stockbroker, and blogger Daniel Davies recently published a thought-provoking blog post on the subject of the current state of bank regulation and the opportunity it presents for the technology industry, titled, “One bank’s cost is another firm’s revenue.” In it, he suggests that tens of billions will be spent over the next few years upgrading the banking infrastructure:

Just taking, though, the cost of bringing creaky systems up to scratch, plus the cost of complete systems integration, new regulation and tougher reporting standards, I think that $ 50bn for the thirty largest banks in the world, as a group, would be a decidedly conservative estimate. It’s not obvious to me how long the regulators are prepared to give the banks in terms of a grace period either, so the spending could end up being decidedly front-loaded. And that’s a big sum of money compared to the size of the software and support services industry. It’s five times the total 2013FY revenues of CapGemini, for example. It’s rather more than twice the annual revenue of SAP. It’s more or less the equivalent of adding another IBM Global Services’ worth of revenue to the industry.

As Davies rightly points out, the in-house IT departments at banks are both under-resourced and often under-capable of tackling these projects.

Accordingly, the startup and software industries would be wise to embrace and encourage Citi and other financial services giants to look beyond their own walls for sources of innovation. A glorified hackathon and a few hundred thousand bucks is just a drop in the bucket when it comes to bringing the banking industry into the 21st century, but all movements need to start somewhere. Maybe one day your favorite grocery delivery service won’t offer a better mobile user experience and utilize on a more impressive underlying technology stack than the banks that power our economy.