Traditional banks are looking to technology service providers to help them navigate the digital transformation that has been accelerated by the Covid-19 pandemic.
According to a report for the US by global technology research and advisory firm, Information Services Group, banks are embracing digital services to compete with the FinTech industry, as well as enhance customer experiences.
The 2021 ISG Provider Lens Digital Banking Services Report also found that banks are adopting emerging technologies such as mobile banking, artificial intelligence, blockchain, contactless payments, open banking, and cloud computing to transform their front- and back-office operations.
Owen Wheatley, lead partner for banking and financial services at ISG, said: “We’re confident that technology spending by the banking industry will continue in areas such as loans, wealth management, real-time payments and banking from anywhere.
“Traditional banks need to use technology to compete with neo-banks or digital-only banks that are offering higher interest rates, transparent fee structures and flexible underwriting policies.”
Despite banks having a thorough knowledge of the functional aspects of the banking system, the report noted that they often lack the expertise to undertake the digital transformation.
As a result, banks tend to rely on an implementation partner’s ability to analyze existing systems and create a roadmap for the future state of the underlying system.
Digital banking transformation can also take some time and demand considerable investments, the report added. Therefore, banks should consider future needs, scalability and agility when engaging with digital banking providers, it added.
However, the challenges of banking modernization include a legacy complexity associated with data migration and integration and regulatory compliance.
In addition, the survey found a change in attitudes from both banking customers and industry executives, with a shift from branch banking to ‘anywhere banking’.
ISG said that branch networks are undergoing a “drastic transformation, redesigned to reflect persona-based hyper-personalization”.
There is also immediate demand for front-end automation emphasizing enhanced user experience, with interactive bots taking center stage.