Digital transformation remains a key area for banks to lead the pack
The banking results season is underway, signalling the beginning of a period of reflection in which banks will be looking to the future and planning investment strategies to secure their market share.
A number of large banking institutions have recently announced modernisation projects that aim to future-proof important IT systems, essential to all areas of the banking ecosystem. Smart investments in technology mean that traditional banks can ward off competition from new players who are taking a technology-first approach.
As more consumers choose to control their finances digitally and the impending launch of the PSD2 (Revised Payment Service Directive) directive, banks are looking at digital modernisation as an important strategy to keep pace a rapidly changing environment.
It is essential that banks continue to establish their presence in the increasingly competitive financial sector. To do so, they cannot continue to rely on aging core systems, but instead need to employ technologies which can evolve alongside consumer trends and digital offerings such as peer-to-peer (P2P) lending. New players are entering the market with smart, agile systems and banks must respond or risk losing both their advantage and their customers.
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According to V.S. Raj, Head of Banking and Financial Services at leading IT services provider Syntel, “The extent to which banks are having to re-imagine in today’s digital climate is becoming clearer. Many banks are soldiering on with back-end systems that are decades old, and this legacy technology creates a drag effect on bank efficiency, and thus profits.”
Raj asserts that evolving core systems will enable banks to provide consumers with seamless access to a rich set of services that can close the gap between the experience they provide and the expectations of Digital Native consumers. With modern customers growing increasingly brand agnostic with a principal loyalty to convenience and accessibility, the situation becomes even more pronounced when it comes to the millennial generation, with 67 per cent of that key demographic having used a banking app.
“The last few years have seen the rise in competition for traditional large banks,” said Raj. “Smaller and more agile high street banks are taking a greater share of the marketplace and digital-only banking start-ups are going further still – removing the physical element of banking and introducing new technology that streamlines all aspects of the customer journey.”
“Large banks are gearing up to the fact that they must act on two fronts – both in upgrading legacy back-end systems and in introducing a more evolved, customer-facing digital infrastructure.”
Recent digital developments notwithstanding, Raj points out that the “human touch” should not be overlooked, as customers still desire human interaction, giving multi-modal banks an advantage over digital-only banks.
“Digital innovations are not the end-all. They are an important strategic lever to better utilise a bank’s human capital and build deeper, multichannel connections with customers,” he said. “On some level, banking will always be a human relationship business, and confidence in the people managing your finances is an indispensable component of customer satisfaction.”