Competition in the banking sector as a motive of innovation activities of banks

Abstract

Introduction.A paper explores the banking sector competition, which can be a strong motivational factor for the innovation. It is clear for banking top management that nowadays innovation is vital in order to gain the competitive advantage. This idea is supported by increased innovation spending in most of the foreign banks in 2013.

Results.The article focuses on the characteristics of the economic category of innovation and different approaches to handling banking innovations. As a result, the author formulates her personal definition of banking innovation. This article also analyses various methods of innovation management that are used in the world's leading banks, such as: active cooperation with IT companies, growth of the innovation departments, attracting customers for mutual development of innovative products and services via social networks. It takes into account the most popular and promising areas of banking innovations such as P2P payments. The current situation in Ukraine shows  that only a small number of banks try to innovate, while most of them simply copy innovations of the leading foreign banks. Some of the major trends in banking innovations in Ukraine include active development of internet and mobile banking, implementation of the customer relationship management (CRM), finding new sources of fee income.

Conclusions. The Ukrainian banks have to formulate the strategy of innovation management and change the structure of bank management in order to continue successful development and increase the competitiveness. It is necessary to reconsider the importance of branch networks of banking institutions in the nearest future, reducing the number of branches while focusing on the online customer services. This will help to cut costs and improve the customer service at the same time.