Earlier this month, the technology services company Endava launched its Retail Banking report, which explored financial institutions’ strategies for meeting customer demand. The report uncovered that nearly 75 per cent of financial institutions were struggling to take advantage of new payment offerings and strong cybersecurity, as their core systems have yet to be modernised.
Looking at all the factors that affect the industry, the report pointed out five focus areas.
Customer-centric banking: Looking at the top priorities, initiatives, and investments, many financial institutions want to improve the digital customer experience. Close to 85 per cent of the respondent organisations see this as a top priority.
Modernising banking: While several institutions are still running on monolithic platforms, many are looking to change, thanks to a growing base of fintechs and changing customer expectations. Close to 55 per cent of financial institutions use a cloud-based core, and many have stated that they have a clear omnichannel strategy.
Key upgrade priorities: Upgrading open banking and payment gateways is the top priority among FIs. Eighty-one per cent of organisations rank them as high—or very high-priority initiatives.
Economics: Around the industry, there’s a cautious optimism about the future. Endava data shows that FIs aren’t eliminating IT initiatives entirely; they’re merely being more selective about their choice.
Top areas for investment: Fifty per cent of banks are investing in artificial intelligence (AI) in the next year, which is at the top of any of the areas evaluated. Another 45 per cent are doing so in data analytics, and 38 per cent are investing additional funds in banking as a service (BaaS).
Fred Fuller, Global Head of Banking at Endava, believes today, financial institutions have come a long way in embracing modern banking, and cloud-based core goes hand-in-hand.
Banks also recognise that migrating a legacy monolithic core to the cloud is not modernisation. They need to leverage 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.
Fuller explained working with technology partners who can implement and manage a new core will help them embrace customer-centric banking. This means quickly rolling out new products and services and streamlining and securing their internal processes – all of which will help them hold onto market share.
In a conversation with edge/ Fuller explained the core steps financial institutions can take to stay ahead of the curve.
Tell us about the five core areas that emerged in the report.
These areas serve as pillars upon which the future of banking is being built. The first area of focus revolves around customer-centric banking, a concept that has been increasingly emphasised as the banking sector evolves. Within this paradigm, the key lies in understanding and catering to customers’ evolving needs and expectations.
Secondly, there’s a notable emphasis on modernising banking infrastructure, which includes transitioning from traditional mainframe systems to more agile and efficient digital platforms. The third focal point centres on adopting and integrating cutting-edge technologies such as artificial intelligence (AI) and data analytics, which are poised to revolutionise banking operations and customer experiences.
Additionally, open banking initiatives are gaining momentum, driven by regulatory mandates and the growing demand for seamless financial services integration. Lastly, there’s a significant emphasis on security and risk management, recognising the imperative of safeguarding sensitive financial data and systems amidst evolving threats and vulnerabilities.
Together, these five areas comprehensively depict the banking industry’s evolution trajectory.
What do you mean by customer-centric banking? How does Endava view it, and what does this report suggest about it?
Customer-centric banking embodies a strategic approach where financial institutions prioritise understanding and meeting customers’ unique needs and preferences. It’s more than just a buzzword; it’s a fundamental shift towards placing the customer at the core of every banking initiative.
Historically, this concept has been a focal point, but technological limitations hindered its full realisation. However, with technological advancements, particularly in data analytics and digital user experiences, customer-centric banking is now within reach.
At Endava, customer-centric banking is a strategic imperative and a cultural mindset that permeates every aspect of our operations. From developing personalised banking solutions to enhancing customer interactions through digital channels, we’re committed to empowering our clients to deliver exceptional experiences.
This report underscores the significance of customer-centricity in driving banking innovation and competitiveness, highlighting key insights and strategies to navigate this paradigm shift effectively.
How do you balance security and customer-friendliness in banking, especially considering the diverse range of customers and potential vulnerabilities?
Balancing security and customer friendliness in banking is a multifaceted challenge, compounded by the diverse needs and vulnerabilities across customer segments. While there’s a perception of a trade-off between security and customer friendliness, it’s imperative to recognise that both are non-negotiable priorities.
At Endava, we advocate for a holistic approach that leverages technology and strategic measures to achieve synergy between these seemingly conflicting objectives. Firstly, robust data analytics capabilities enable proactive risk management, allowing banks to identify and mitigate potential threats while ensuring seamless customer experiences.
Real-time fraud detection leveraging advanced algorithms and AI-driven insights adds another layer of security without compromising usability.
Moreover, adopting a risk-based authentication framework enables banks to dynamically adjust security measures based on contextual factors, striking a balance between security and user convenience.
Fostering cybersecurity awareness and investing in continuous innovation is pivotal in addressing the evolving challenges of safeguarding customer assets and data in an increasingly digital banking landscape.
Considering the evolving nature of customer requirements, how do you ensure technological robustness and balance between individual and commercial banking needs?
Ensuring technological robustness and catering to the diverse needs of individual and commercial banking clients demands a nuanced approach that acknowledges customer requirements’ evolving nature.
At Endava, we recognise the importance of agility and scalability in addressing these dynamic demands. By leveraging flexible architectural frameworks and modular solutions, banks can adapt their technology infrastructure to accommodate the unique needs of both individual and commercial clients.
Customers may focus on intuitive digital interfaces, personalised financial insights, and frictionless transactions. In contrast, commercial clients may prioritise robust treasury management, seamless integrations with enterprise systems, and sophisticated analytics for informed decision-making.
By adopting a customer-centric mindset and employing agile development methodologies, banks can iteratively enhance their technological capabilities to meet the evolving needs of diverse customer segments.
Additionally, fostering collaboration between business and technology stakeholders facilitates alignment with strategic objectives and ensures that technological investments drive tangible business outcomes across individual and commercial banking domains.
What role does artificial intelligence (AI) play in modern banking, and what are the associated challenges?
AI transforms modern banking, enabling automation, personalised customer experiences, and real-time decision-making. However, challenges include addressing biases in AI algorithms, ensuring data privacy, and safeguarding against malicious use by bad actors.
Banks can transition from legacy mainframe systems to modern cloud-based infrastructures through gradual migration strategies, such as standing up digital capabilities in the cloud and progressively moving functionalities over time. This approach minimises disruption and allows organisations to adapt gradually.
The top investment areas in banking include AI, data analytics, open banking, and infrastructure modernisation. These investments are crucial for staying competitive, meeting regulatory requirements, and enhancing customer experiences in an increasingly digital landscape.
How do banks address the economic implications of upgrading their technology infrastructure?
Banks must consider the economic implications of technology upgrades, including implementation, training, and ongoing maintenance costs. They must prioritise investments based on their strategic goals, regulatory requirements, and customer demands while ensuring long-term sustainability and profitability.
