The False God of Innovation

We should be careful before glorifying financial innovation

In the olden days, awards were not given for innovation itself but for how effective an innovation was in relation to the importance of the problem it solved. But what we see today in financial inclusion is the ubiquity of innovation – often front and center – as the lead determinant in a plethora of prize competitions. Check the first judging criteria of this prestigious contest.

Why would the entity commissioning the award, The Wall Street Journal, care about how innovative or unique the business was or how it broke from tradition? Wouldn’t it care most about how well the service solved a problem and the problem’s significance?

In financial inclusion, innovation itself has been an endgame for quite some time. Take the much-hyped “Keep the Change,” Bank of America’s program to hoover in payment leftovers at the cash register. If you buy $3.80 worth of coffee, the amount is rounded to $4.00 of which twenty cents goes to your bank account. Greeted as a clever way to encourage savings, the idea was indeed innovative back in 2006. But was it good? Here is what a critic, citing another critic, had to say about Keep the Change: “If you want something that makes it quick and easy, lets you fool yourself into thinking you’re actually saving, (spend-to-save) programs are good.” But despite this perversion, Keep the Change has been the winner of multiple awards, many with innovation in their descriptions.

Plenty of ideas are creative and go nowhere. That’s where the ideas I have in the shower go, where they should, down the drain. But innovation is the crack-cocaine of the funding world. Funders including donors and impact investors want to be thought of as doing something new and what is newer than innovation? Innovation is the new excellence, the new buzzword, the new impact.

Design firms that feed funder appetite for innovation are generating an explosion of events that dub those in attendance “expert-for-a-day.” I just completed my third and possibly last human-centered hackathon, a forum that deemed every idea safe and every suggestion good, no matter how absurd. We were instructed as we brainstormed to stay mentally positive and intellectually curious, even if what was on offer was decidedly insane. This open-mindedness, we were told, was the heart of the innovation process. But after a day of outlandish ideation, we were permitted little room to pronounce any proposal doomed or even dangerous. By the close of the workshop, we had offered up pounds of sticky-notes, colored dots, and Sharpies to the grand deity of design: the prototype. But to what end?

A Brazilian banker friend, in pleasantly accented English, reflected on his own experience a few years back where he had endured weeks and weeks of co-design and prototyping in the name of financial inclusion. The process was led by the very same firm that engineered Keep the Change. “It was all so exciting, so energizing,” he remembered. Asked how the product performed, he responded: “Oh, uptake was so low and usage lower.”

Innovation in financial inclusion is not a problem per se; it can be a path to socially important solutions. And, not all innovation is led by design firms, but rather by committed entrepreneurs and leaders. Yet, should innovation be a goal rewarded for its own sake? Should it be egged on by brainstorm-brokers who have no ultimate stake in the outcome, especially when those “innovated upon” can become exposed to extreme risk?

Glorifying, even fetishizing innovation in financial inclusion surely has its downsides. Perhaps the biggest is that no one knows what financial inclusion is. Back to the olden days: kings, their navies, and merchant mariners all felt the pinch of not knowing the location of their ships at sea. Only in determining both latitude and longitude could sailors fix their sea-going positions. The “un-longituded” had a problem that was precise, important and finally, though innovation, solved. But that’s not the case in financial inclusion. The problem is imprecise, and if you ask the “un-included,” depending on what scheme you are including them in, inclusion is often irrelevant.

Rewarding innovation qua innovation can point the arrows of effort and resources away from expanding proven concepts toward accelerating unproven ones. What about the long-established credit union extending business hours in a hard scrabble area or enabling the expansion (pg. 5) of a rural bank network? Tens of thousands of in-the-trenches improvements can advance good financial services, none of which may be particularly innovative or require expensive design processes, but many of which have demonstrated their relevance, are worthy of attention, and even deserve a prize.

Kim Wilson is a Lecturer at the Fletcher School, Tufts University, a Senior Fellow of Fletchers’ Council on Emerging Market Enterprises and incoming Board Member of the Hitachi Center for Technology and International Affairs.

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