Innovation drives growth at consumer goods companies. But does it drive growth at financial institutions? We’re less likely to think about banks as innovators. The industry is complex and highly regulated. With the exception of the credit card industry, few new products and true innovations are seen in financial services. Their core offerings have been the same for centuries: checking and savings accounts.

Yet technology is now providing financial institutions a wonderful opportunity for innovation. Some recent examples:

• The ability to deposit a check through your smart phone, by taking a picture of the check (known as RDC or Remote Deposit Capture).
• Using an application on a tablet to transfer money to others.
• Connecting with customers for service and support through mobile banking and social networking. (Citibank’s Facebook page has almost 200,000 “likes”.)

In fact, technology – especially mobile apps and social networking – is creating many opportunities for banks, especially national banks, to innovate. How important is this?

When the Occupy Wall Street movement targeted banks with their National Bank Transfer Day last month, encouraging customers to move from the big banks to local credit unions, Bank of America fought back with an ad campaign focusing on one of their key differentiators from credit unions: technological innovation.

The Bank of America ad campaign talked about sending your mother money through your iPad (because nothing is more American than motherhood and Apple!). It highlighted their mobile solutions, too.

National banks are also furiously exploring the possibilities of mobile wallets, or using a mobile device as a debit card. Merchant enablement will be a key part of the success of these initiatives. Bigger banks are in a much better place to invite merchant support and implement the NFC readers (Near Field Communication) and other devices that will be required for this technology. Nor is innovation limited to the consumer space – for instance, U.S. Bank recently announced that it is developing hybrid web/paper solutions for corporations, which have been slow to adopt electronic payments.

It’s clear that national and regional banks need to use technological innovation to continue to differentiate, whether it is web, mobile or social. Big banks definitely have more resources to bring innovative technology to consumers than community institutions such as credit unions.

Regional banks and credit unions must embrace technology innovation as well: to erode that point of differentiation, to forge closer bonds with customers, and to reduce their own infrastructure costs.

But the flip side of technological innovation is risk to clients. Right now the industry is one mobile security scare away from a backlash against mobile banking. Yes, consumers are enamored with mobile technology, but a highly public mobile security lapse is inevitable – 71% of banks report that they have insufficient resources to detect fraud. Both types of financial institutions are equally susceptible.

Both groups must innovate to achieve differentiation, yet they must innovate in a very balanced way. What becomes critical is to optimize technology platforms  and messaging. How do you educate consumers who might not be aware of the risks and benefits of these new financial offerings? Yes, technology will transform our understanding of the old checking and saving accounts – but it will take good research to get us there. Innovation is not just for consumer goods anymore!