More competitors than ever are offering core services on innovative digital platforms, whilst banks are trailing behind due to aging legacy systems.
With the banks' reporting season underway, the banking sector is under pressure to cut costs and become more agile than ever before.
Fierce competition from disruptive, innovative players, an ever-complex landscape of regulations, and more demands from digitally-savvy consumers are all putting pressure on traditional banks to transform their businesses.
Nitin Rakesh, CEO and President of global IT solutions provider Syntel Inc., comments:
"Customers are not as loyal as they once were; they are brand agnostic and more attracted to ease of access and convenience. Consumers will spare little thought for banks that struggle to technologically renew their businesses. They are simply moving to banks that can provide customers with 'anytime, anywhere' access to their services. Those banks falling behind in the digital age will struggle to offer the omni-channel experience and approach that their customers are looking for."
"Outdated systems lead to inefficient operations and ultimately, banks waste money attempting to patch things up rather than properly modernising their systems. In order for banks to thrive, they need to adapt to the realities of the two-speed world – reduce the cost of running the bank and use the savings to change the bank. In other words, modernise and migrate mission critical systems in order to engage the digital native consumer. This is now an imperative to avoid ‘digital disconnect’," Mr Rakesh added.
According to research by Statista, between 2007 and 2015, 56 per cent of the British population regularly used online banking for their financial activities. Research from the British Bankers' Association (BBA) report World of Change showed an average of 9.6 million daily customer logins to internet banking services via laptop, tablet or desktop for the month of March 2015.
Between 2008 and 2013, there was a 43 per cent decline in telephone communications by customers to their bank, and a 6 per cent decline in branch transactions in 2014. These trends are irreversible, forcing banks to adopt a more digital friendly platform in order to cater to these changing customer trends.
Despite efforts to keep up with the digital age, innovations in banking are still hindered by lingering portfolios of legacy systems. Years of constantly updating and integrating new technology has left most banks with a patchwork of technical legacy stretching back decades. Banks are therefore held back by the limitations of their own systems. In order to be fully up to date with the times, banks need to seek out the right partners to upgrade their legacy systems, in order to create an agile infrastructure that is able to adapt to the digital landscape.
According to Rakesh, the most costly and significant impacts of aging systems are the IT failures that continue to be a thorn in the side of traditional banks and attract the wrath of regulators and customers alike. This negatively affects all areas of operation and leaves them vulnerable to disruptive competitors that employ newer digital platforms.
Due to the rigid architecture that legacy systems are built on, developing new products and other innovations becomes a struggle and it reduces the speed to market.
Rakesh adds: "The banks are finding that our outcomes based approach to digital transformation, which relies on the automation of processes to drive agility, efficiency and savings, frees up invaluable resource and capability, allowing them to focus on their core business and enhance the customer experience."
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