Balancing Innovation and Stability: How Swedish Incumbent Banks Organize Innovation Under Digital Transformation and Fintech Competition

Sammanfattning

Digital transformation and increasing fintech competition have significantly reshaped thebanking sector, creating growing pressure on incumbent banks to adapt their organizationalstructures, technologies, and innovation practices. At the same time, banks operate withinhighly regulated environments characterized by operational complexity, risk managementrequirements, and high expectations regarding reliability and customer trust. These conditionscreate tensions between the need for innovation and the need to maintain operational stability.The purpose of this study is to explore how large Swedish incumbent banks organizeinnovation in response to digital transformation and increasing fintech competition. The studyis based on a qualitative multiple-case study design including seven semi-structuredinterviews conducted with respondents from four large Swedish banks. The empiricalmaterial was analyzed through thematic analysis and interpreted using the theoreticalperspectives of organizational ambidexterity and organizational inertia.The findings show that innovation within incumbent banks is primarily associated withoperational modernization, customer-oriented digitalization, and the gradual improvement ofexisting services rather than highly disruptive transformation. Although exploratoryinnovation activities exist, they are often selectively pursued and expected to remaincompatible with broader organizational priorities related to governance, operationalcontinuity, and customer trust. The findings further indicate that banks organize innovationdifferently depending on strategic priorities and interpretations of innovation-relateduncertainty. In addition, legacy systems, organizational complexity, and risk-orienteddecision-making processes were found to create important constraints on organizationaladaptation.The study concludes that incumbent banks primarily pursue innovation through gradualadaptation, operational integration, and selective forms of exploration rather than throughhighly disruptive transformation.