Investments that are necessary to innovate and serve customers are no longer sustainable while COVID-19 hastens the need to exploit the potential of digital innovations. Serving customers accurately during unprecedented times requires a new mindset and business model innovations. If banks respond to customer requirements in completely new special situations, they can gain trust and integrity and become winners of the crisis.

Worldwide the level of uncertainty is reaching new heights, while technology forms the backbone of the current innovation cycle, precisely the digital transformation. However, a technological solution only becomes an innovation when it generates concrete added value for the user. Activism to digitise everything that can be digitised is not conducive to achieving the overall goals of a business. Thus, the primary purpose is profitable growth while maintaining corporate social responsibility. Firms can only realise sustainable growth if they systematically use technologies for innovation to support the customer journey. To meet customer expectations and to capture new markets, we need more than just digital innovations. Lockdown and home models forced many banks to adopt digital client interaction models. The more it is crucial for relationship managers and client advisors not to forget their customers’ expectations, especially as they changed.

The Quest to Improve People’s Lives

Gross domestic product and income growth are essential for economic development, and global wealth is ever increasing. According to UBS and PwC, billionaires’ wealth rises to $10, 2 trillion amid COVID crisis, which is more than a quarter before the crisis level. China alone added 260 billionaires since the beginning of 2020 and has more of them than any country in the world. However, what drives human motivation is the quality of life, well-being, self-actualisation, or happiness. The World Happiness Report has measured the happiness of an economy since 2011. From a sociological point of view, the overall goal is to have all the things that are essential for a better life, such as health care, security, education, or nutrition. Economic growth must be generated, and this requires innovation. The Global Innovation Index Report 2020 asked the question “Who Will Finance Innovation?” And that is the crucial point! Financial resources are needed to promote technologies that support innovation and in turn, make people happy. This is what should drive the wealth managers agendas.

Management theory from the 1980s has led us to the maximum principle: ever more value, money, power, prosperity. Our traditional understanding of innovation is that we bring as many and better, sometimes useless products to the market as possible. The Japanese toy “Tamagotchi” from the 1990s was introduced to the market, only to suggest to the user that he or she has to take care of a virtual chick. Nobody would have thought that a need could be created for this product. However, innovation should solve a problem, not create a need.

“An innovation should solve a problem and not create a need.”

New Ways of Thinking

People’s situations change regularly and often at short intervals. By observing customer behaviour during the corona lockdown, we found that demand does not correspond to the supply. Uncertainty and fear have led to people behaving passively ever since, hardly making any decisions and focusing on existential matters. Luxury products and premium services from many financial institutes are hardly in demand anymore. Banks that cannot improvise and quickly adapt their offerings to a new situation will lose high net worth individuals. This resilience is an essential prerequisite for anti-cyclical investments in innovation, especially in exceptional situations. The time to react and change the offering to new client demands is vital. If banks are waiting for the next innovation cycle to begin, they have already missed it.

In contrast to a traditional innovation process, where planning is based on a rigid long-term strategy, agile methods such as Lean Startup help us to find our way in a volatile, uncertain and complex world. Through continuous development, testing and optimisation, the risk and marketability of a product or service can be assessed quickly and cost-effectively. In three iterative process steps, we see whether a relevant problem of the customer is solved (problem-solving fit), whether a real market for the innovation exists (product-market fit) and whether the business can grow profitably (scaling).

“If you wait for the next innovation cycle, you already missed it.”

Filter Information from the Noise

The growing data volume with simultaneously decreasing marginal and transaction costs makes it difficult to separate noise from relevant information. We also see this excessive demand and incomprehensibility in machine learning and artificial intelligence. Investment advisors are less and less able to explain how an algorithm reaches a conclusion or investment decision. In addition to agile methods, chaotic, unpredictable, and incomprehensible situations require a new meaningful conceptional framework that focuses relentlessly on the client journey. In 2018, the futurologist Jamais Cascio introduced the acronym BANI for this new situation. BANI stands for brittle, anxious, non-linear and incomprehensible. It describes the current state of the world better and explains sensitivities and interrelationships. The current situation needs a new way of thinking, which promotes resilience, empathy, flexibility, and openness.

Chaos Instead of Failsafe Systems

In a global business world, a cascade of failures can lead to a catastrophic collapse. Once more, COVID-19 showed that an unpredictable event in one country could trigger a global crisis. As a result, a brittle system does not fail but breaks down, and chaos follows. As a result, people’s fear and anxiety increases, even to the point of paralysis of the global economy, partly because cause and effect are decoupled and disproportionate. Non-linearity is a fact for the incidence rate of the pandemic but also drives business networks and social media interactions. A range of factors that seem to be irrational, illogical and senseless contribute to our feeling of losing control about wealth and estate planning.

“Frugal banking exhibits non-linear customer journeys.”

Learning from Asia: Frugal Innovations

With the lean method, all unnecessary steps in the innovation process can be eliminated, and risks in development and investments in marketing can be optimised. The market is increasingly demanding, simpler, and cheaper solutions that are practical and tailored to the customer’s circumstances. Nowadays, these solutions must be quickly accessible via digital platforms. The complete focus on the customer’s needs can be achieved with the concept of frugal innovation. This unique innovation approach, which is still relatively unknown in the financial sector, has its origins in India, where jugaad means an emergency or transitional solution. Most emerging markets do not allow complicated and expensive products and high prices. Like Lean Startup, where the goal is to determine whether money can be made with a minimally viable product (MVP), frugal innovation focuses on core functionality while reducing complexity and removing nonessential features. Prototyping and iterative customer interactions accelerate the learning process, and the core benefit of a solution is tested quickly and in a resource-efficient manner.

Frugal innovation offers new vistas that promote resilience, empathy, flexibility, and openness.

With frugal innovations, the customer’s view, type of application and application environment are moved into the centre of the wealth management process. It is only applied where it makes sense from the customer’s perspective. This open, accessible approach reconfigures value chains and redesigns products to serve wealthy clients in a particular situation. It generates value with few resources and can translate challenges into opportunities. Embracing open innovation concepts for development and commercialisation boosts frugal innovation because value-added can be created effectively within a network of diverse actors within a financial services ecosystem.

Frugal Digital Wealth Management

The democratisation of investing and the quest for simplicity also reflects trends like minimalism, which includes the appreciation of a simple, sustainable lifestyle and the conscious reduction of material goods (sharing economy). For wealth managers, this means a change from conventional banking with ever new high-quality services to frugal, digital and cost-efficient services. The change in values and new mindset calls for a strategy that deals with sudden changes and supports agile methods. Fast and frugal banking can be a response to the COVID-19 pandemic to develop and win new wealth markets and segments.

The estimated wealth transfer of $68 trillion from the baby boomers to generation X and millennials will impact financial advisors radically. Since this new responsible clientele prefers digital, transparent, less complicated easy to use and perfect fit solutions to their actual situation, the frugal innovations can be of great support. To do less with more impact and offer highly relevant and individual solutions for everyone, banks must reinvent their business models, co-innovate with their clients and learn to master a cross-industry ecosystem.

Those who have the most profound understanding of their clients’ expectations beyond just financial matters, collaborate with specialist providers to deliver solutions that fit, will become winners of the crisis. Frugal banks empower their client advisors since they are key differentiators. Because only if they put themselves in the shoes of their clients and see where they run and where the shoe pinches, they can provide targeted solutions.

About the Author

Daniel Fasnacht headshotDaniel Fasnacht (MBA, PhD) is the CEO and founder of the strategy and innovation consulting firm EcosystemPartners AG, Fellow of the University of Zurich, lecturer and writer. He is an expert for open innovation, digital transformation, ecosystems and its impacts on society, economics and politics.



Image: Physical distancing. Image created by Samuel Rodriguez. Submitted for United Nations Global Call Out To Creatives – help stop the spread of COVID-19. Free available under