Innovation: A catalyst for sustained RCB growth

Francis Enimil Ashun

The COVID-19 pandemic has exposed the weaknesses in legacy banking practices, and banks need to explore new and innovative ways to stay relevant for the future. The future of banking has forever been affected by the COVID-19 pandemic, and any bank that does not look forward but continues to operate like in the pre-covid times is bound to fail.

Technological disruptions and emerging banking models continue to affect the industry, and forward-looking banks that recognise and take advantage of them reap the benefits and stay ahead of the pack. To compete effectively, Rural and Community Banks (RCBs) must innovate to remain relevant in retail and SME banking.

The technological evolution in the finance market has prompted banks to rethink and reconfigure strategies to compete, and RCBs cannot be left behind. RCBs cannot maintain old legacy practices and grow in the present highly fluid innovation environment.

Innovation should not always be centrally engineered. Staff must be allowed to display innovativeness and present their ideas to a pool. Managers must be open and accepting of such innovation. Bank management must entrench innovative thinking into their staff to think innovatively. Innovation experts argue that businesses which make a substantial commitment to innovation and entrench it deeply throughout their culture perform exceptionally better than those that wait and follow industry leaders.


Why innovation matters

Innovation is the lifeblood of progress and development, and therefore RCBs must not be left behind. The following are some of the reasons RCBs must pursue innovation:

Expansion and growth: Successful innovation leads to more innovation, enabling the bank to scale and grow.

Moving ahead of the competition: The product or service the bank develops helps them differentiate themselves from the competition, leading to increased income. It also helps the competition to adopt or adapt to bring the good in the innovation to the larger banking industry. The innovative bank becomes the industry leader while the others become followers.

Customer retention: Innovation helps ensure the bank keeps in tune with customers – always meeting their needs, anticipating what will be needed tomorrow, and being ready for them; thus keeping existing clients of the bank loyal and attracting new ones.

Talent acquisition: When an RCB is known for giving its staff the chance to excel, it serves as a draw for potential talents to want to work for them.  Top-tier employees want to work for businesses that are at the forefront of innovation because that’s where the action, the learning, and opportunities for personal career advancements are.

Types of Innovation

Technological Innovation

Technological innovation takes place when companies try to gain a competitive advantage by either reducing costs or introducing new technology. Technological innovation has been a hot topic in recent years, particularly when coupled with the concept of disruptive innovation. Disruptive innovation is usually a technological advancement that renders previous products/services (or even entire industries) irrelevant.

Many banks are wary of this type of innovation as the cost of rolling out new technology, especially new upgraded banking software, is huge. However, it is more cost-effective in the long-term than being stuck in legacy technology that fails to take cognisance of changing technology. In this regard, ARB Apex Bank has been at the forefront of helping the banks move in that direction, albeit on a slow calculated track.

Market, product or entrepreneurial Innovation

This is the pursuit of creative or novel solutions for challenges confronting the banks. These challenges can include developing new or updated versions of existing products and services or new administrative techniques for performing the daily functions of the bank optimally, and in the most cost-efficient manner. Product development is not only about developing something new, it’s also about taking an existing product or service and making it much better.

Most of the RCBs whose performance has been consistently top-notch over the years are known to be always coming out with innovative products and services to delight their clients. Such banks, like Atwima Kwanwoma and Amenfiman just to name a couple, are known to be always on top of their game by letting their customers experience their superior product line up. It is hoped that other banks will take a lesson or two from these giants to push their banks in a similar direction.

Business Model or strategic innovation

In the life of business, growth is a constant. Businesses that don’t grow become stagnant or die-off. However, sustained growth depends on the business constantly innovating in its business models, making changes to its operations, mission, and direction. Business model innovation involves enhancing the advantage and value creation by making changes to both the value promise to clients and the underlying business model that the bank operates on. Many businesses that were once top performers but could not recognise the need to take advantage of innovations in the industry (and gradually change their models to suit the changing times) have been left in history and are now pale shadows of themselves or dead altogether.

Strategic innovation pertains to processes: how things are done as opposed to what the end product is. Strategic changes can be disruptive but are more often incremental. Incremental innovation is the idea that small changes can, over time, rapidly transform the broader organisation. A critical study of many RCBs that were once strong banks but are now struggling may show that they kept their founding business models for far too long, or were too late in recognising the need to change with the times.

Approaches to adopting innovations

Innovation can broadly be grouped into two categories: disruptive (new or different knowledge; legacy competence destroying); and incremental (building upon current knowledge; competence enhancing). RCBs have generally been conservative in adopting changes that would be disruptive to their operations. Given this, they mostly adopt the incremental innovations and gradually slide into the new processes.

However, with the COVID pandemic that has wrought havoc on many businesses, it is imperative that RCBs quickly adopt technologies, products and services, and new ways of doing banking business to remain relevant. The pandemic has resulted in many banks emphasising or increasing their contactless operations, introducing products and services that do not require an in-person operation; or where the client can stay in the comfort of their homes and offices and completely undertake their transactions.

Should RCBs not explore the new easy-to-get mobile short-codes, improved mobile app operations that would enable a potential client to sign up and become a customer without stepping into the bank? It is less expensive in the long term to create an app whereby a client can open an account and transact business without undermining the KYC processes. Can the ARBApex Uconnect app not be enhanced to enable these processes to be completed in-app?

It’s a gamble to adopt disruptive innovation as there could be hiccups along the way of implementation, but it pays off hugely in the long term if successfully implemented. For instance, the Itrans product was a game-changer in the Ghanaian local money transfer market in its time. However, by a single stroke of an innovative script code mobile money tele-transfers has made Itrans a dinosaur. If RCBs and the ARBApex Bank had read the changing times and gradually introduced technology into the Itrans operations, the product would have been the biggest game-changer and the telecoms would have had to tag along rather than becoming the present leaders. Adopting the Incremental approach is a time test and preferred by most conservative bank executives.

Since banks, and most especially RCBs, are very conservative and uncomfortable with sudden disruption in their operations and processes they can adopt the incremental innovation but also pay attention to emerging innovation in the banking industry. Adopting a combination of these strategies can result in positive outcomes for RCBs, as they would have the benefits from both innovations’ approach.

Aligning Innovation to Strategic Plans

It is easy to overlook the importance of innovation in strategic planning. To have a strong strategic plan, RCBs must incorporate innovation into it. Recognising the importance of innovation – in both product and service and bank business model – to the growth and sustenance of the banks would drive top management decision-making processes. RCBs must develop, implement and execute strategy-to-innovation relationships. This will provide flexibility so the strategic plans can successfully manouvre when unforeseen barriers arise or new ideas never thought of during the strategy planning come up.

It is also in RCBs’ growth interest to adopt, adapt and implement emerging industry best-practice methodologies. If this is properly done, it can lead to new opportunities for advancement and a competitive edge. Encouraging and aligning innovation to strategic plans is sure to ensure the RCBs are at the cutting-edge of new industry standards, and offer them the flexibility to quickly adopt and adapt to stay relevant.

Engaging with the client

Legacy methods of decision-making processes on client engagement follow a process that involves the banks envisaging customer needs and providing services and products they believe will solve such needs. The main engagement of a bank with its clients has followed the traditional or legacy strategies focused on media streams like radio, television, billboards, etc. However, in the future of banking that’s already upon us, the engagement must follow the client’s decision-journey. If a bank refuses or is unable to align the needs of its clients – both existing and potential – with its product or service offering, then it is setting itself up for failure.

RCBs must utilise the new media resource means (e.g., online reviews, blogs, social networks, etc.) to reach out to their clients to know and understand their needs. Social media has now become a key avenue for enabling businesses to engage with clients. It is one very cost-efficient way for banks to remain in constant touch with their clients.

However, very few RCBs have an active presence on the various social media platforms to engage with people in their catchment areas. Social media interactions with clients lead to the customer becoming an advocate for the bank, creating a loyalty bond that spills over to other potential clients. Therefore, RCBs must focus on the future by creating a positive social rapport through online presence with other social media tools to leverage their customer decision processes.


The adage ‘innovate or die’ holds for banks and most especially for rural banks. Many traditional banks are venturing into the small towns, bringing with them their business models and strong technological presence. This not only threatens to attract clients of RCBs to these banks, but the very existence of the RCBs in such areas could be threatened. To continue remaining relevant, rural banks should adopt and adapt innovative practices constantly; looking at ways to adapt best practices born out of new knowledge in the industry. It is only through innovation that RCBs can hold on their own against the onslaught of bigger banks and Fintechs.


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The writer has extensive experience in Rural Banking in Ghana. He is a researcher in current trends in Human Resources Management and Development and Rural Banking. He may be reached on [email protected] Cell: +233 050 636 3388

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