A new Retail Banking Report explores financial institutions’ (FIs) strategies for meeting customer demand, and uncovers that the majority (75%) are struggling to take advantage of new payment offerings and stronger cybersecurity because their core systems haven’t been modernised.
However, 75% of organisations believe they offer a good user experience, have strong data management practices and better technology than competitors.
But even though over half of the FIs have moved their core systems to the cloud, the responses reveal problems implementing, scaling, or managing them.
The top barriers to implementing a cloud-based core are competing technical priorities (40%), a lack of technical resources to manage it (37%), a fear of a long implementation (32%), and fraud/security concerns (29%).
FIs continue to face rising interest rates and inflation, and the report also taps into economic drivers such as creating a more profitable and loyal customer base.
FIs ranked high priority ambitions for the next year as increasing efficiency (85%) and retaining customers (83%), as well as improving the digital customer experience (85%), maintaining system stability (83%), and strengthening security/reducing fraud (83%).
To meet these goals, many are turning to new technologies to improve internal processes and customer-facing products.
While most are in the early stages of adoption, half of the FIs see AI as a top area for investment, closely followed by data analytics (45%) – both of which can offer powerful real-time fraud detection, virtual assistants, security, and investment management.
When it comes to their existing tech, upgrading Open Banking (81%) and payment gateways (81%) are high or very high priorities.
These focus areas will help them tackle ongoing challenges by becoming more customer-driven and tapping into additional revenue.
Key takeaways:
Customer-centric banking: When looking at the top priorities, initiatives, and investments for FIs, many aim to improve the customer experience. Eighty-five percent of respondent organisations see improving the digital customer experience as paramount, and a similar number rank retaining existing customers as a top priority.
Modernisation of banking: 55% of the FIs included in the study use a cloud-based core, and many say they have a clear omnichannel strategy, tech that’s ahead of the competition and strong data management practices.
Key upgrade priorities: Upgrading Open Banking and payment gateways are the top priorities among FIs. 81% of organisations rank them as high- or very high-priority initiatives.
Economics: Around the industry, there’s a cautious optimism about the future. While many have dealt with stagnant budgets since the early 2020s, Endava data shows that FIs aren’t eliminating IT initiatives entirely; they’re merely being more selective about which they choose to pursue.
Top areas for investment: 50% of banks are investing in artificial intelligence (AI) in the next year, the top of any of the areas evaluated. Another 45% are doing so in data analytics, and 38% are investing additional funds in banking as a service (BaaS).
“FIs have come a long way in embracing the fact that modern banking and a cloud-based core go hand-in-hand. Banks also recognise that migrating a legacy monolithic core to the cloud is not modernisation,” comments Fred Fuller, Global Head of Banking at Endava.
“They need to leverage modern digital technology to truly modernise the core to create a flexible and dynamic infrastructure that can quickly respond to customer and market demands.
Although FIs think their technology is stronger than their competitors, the reality is that new features and functionality are usually built on old systems, which massively limits their scope for innovation. ”
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