Innovation. It’s all around us: iPods, iPhones, SlingBoxes, Nintendo’s Wii, NetFlix. But financial services? Sure the boys on the trading desk and the whiz kids at the hedge funds can be innovative. But retail financial services? Prior to the mainstream adoption of the Internet in the mid-90’s the last innovation in retail financial services was arguably the ATM – 30 years ago. Since then, we have witnessed innovation within retail financial services as a more frequent pace and it’s about to get really interesting since it is coming from non-traditional competitors.

Web 2.0 is perhaps the biggest catalyst behind this trend, and we’re not simply referring to AJAX-enabled websites. It’s about the socialization of the Internet and it’s going to be a major disrupter to mainstream financial firms. Firms like Paypal are changing the payments industry; Mint is helping people find savings within their spending; Cake Financial is allowing people to share their trading strategies; and Sir Richard Branson is changing the lending industry with Virgin Money.

Obviously, this presents major challenges to financial marketers who are often saddled with a gaggle of lawyers controlling their messaging. It does appear that all is not lost, however. We have seen innovative maneuvers from large financial firms recently: Bank of America has added customer reviews to its site as well as a small business online community. Wells Fargo has Stagecoach Island and the bubbly fun-loving Cassie. TDAmeritrade recently added a tool from PredictWallStreet that allows users to track and share opinions about the market. It’s a good start. Now, marketers must collectively build on this momentum and take full advantage of all that Web 2.0 has to offer.