Almost three quarters (74%) of all banks across the UK say they expect to eliminate human interaction from their retail banking services within the next decade, as rapidly evolving customer behaviours and expectations render traditional banking services obsolete.
According to research by leading digital innovator Avanade, almost two thirds (63%) senior IT and digital decision makers from across the UK banking sector recognise that traditional methods of banking are being overtaken by disruptive competition. Over half (51%) admit they’re already facing greater competition from fintech start-ups, but say the emergence of the likes of Amazon, Google and Facebook into the banking sector represents the greatest threat to market share and profitability in the long-term.
A majority (83%) of respondents in the UK accept they are playing catch-up in terms of delivering the type of innovative and personalised digital experience customers are demanding. The majority (77%) agree that in order to remain competitive their organisation will need to increase spending on the customer experience, including:
- Improving personalisation of the customer experience (91%)
- Providing a more seamless experience across multiple channels (72%)
- Closing some or all physical branches to go fully digital (46%)
Caught in a race for relevance, British IT decision makers believe the future survival of the sector hangs on how quickly they can allocate budget to projects which meet increasingly digital consumer demands. Despite placing investment in new technologies at the top of their strategic priorities however, they claim the need to maintain legacy systems – accounting for on average 19% of annual IT budget – is making it almost impossible to direct investment to technologies that will drive the business forward.
Commenting on the findings, Paul Bowen, Banking Lead, Avanade Europe said: “European retail banks are well aware of the challenges they need to address in order to reconnect with customers, but their reliance on legacy IT systems, built up over forty years or more, is acting like a lead weight, slowing them down whilst new entrants, both fintech’s and established technology giants, are streaks ahead.”
Almost all (94%) respondents from the UK believe that modernising their organisation’s IT systems would help them keep pace with digital competitors, reducing operational costs and paving the way for future investments designed to give their organization a competitive advantage.
Paul Bowen added: “Banks must discard their old ways of doing business and invest in technologies which empower their workforce to deliver a more personalised service, and that help build a more seamless engagement with customers across every channel. IT modernisation will form the bedrock for the radical new approach banks must take to safeguard their future. Most recognise that to effect genuine change, they will need third party support.”
Avanade recommends a three-step approach for banks to thrive in the digital world:
- Modernise your legacy IT – address your legacy challenges through application modernization and a move to the cloud, allowing banks to achieve the agility required to serve augmented workforces
- Optimise operations – cut operational costs by deploying machine learning capabilities, predictive models and robotic process automation (RPA), and invest in tools that improve employee efficiency and offer better customer service
- Reimagine the customer experience – create cost-effective, unique and fast-to-market digital experiences for customers, powered by analytics
Find out more about Avanade’s recommendations as outlined in the full report <insert link>: