As much as 75 per cent of financial institutions (FIs) are struggling to utilise new payment offerings and stronger cybersecurity due to continuing reliance on legacy core systems; Endava, a technology services company, has revealed.
Endava delves into FI strategies for meeting customer demand in its new Retail Banking Report, finding that 75 per cent of organisations believe they offer a good user experience, have strong data management practices and better technology than competitors.
However, even though over half of the FIs have moved their core systems to the cloud, the responses reveal problems implementing, scaling, or managing them. The top barriers to implementing a cloud-based core are competing technical priorities (40 per cent), a lack of technical resources to manage it (37 per cent), a fear of a long implementation (32 per cent), and fraud/security concerns (29 per cent).
Fred Fuller, global head of banking at Endava, commented: “FIs have come a long way in embracing the fact that modern banking and a cloud-based core go hand-in-hand. Banks also recognise that migrating a legacy monolithic core to the cloud is not modernisation.
“They need to leverage modern 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 older systems, which massively limits their scope for innovation.
“Working with technology partners who can implement and manage a new core will help them embrace customer-centric banking. This means being able to quickly roll out new products and services, as well as streamlining and securing their internal processes – all of which will help them hold onto market share.”
Upgrading existing tech remains high priority
FIs continue to face rising interest rates and inflation, and the report also taps into economic drivers such as creating a more profitable and loyal customer base. FIs ranked high-priority ambitions for the next year as increasing efficiency (85 per cent) and retaining customers (83 per cent), as well as improving the digital customer experience (85 per cent), maintaining system stability (83 per cent), and strengthening security/reducing fraud (83 per cent). To meet these goals, many firms are now looking to new technologies to improve internal processes and customer-facing products.
While most are in the early stages of adoption, half of FIs understandably view AI as a top area for investment, closely followed by data analytics (45 per cent) – both of which can offer powerful real-time fraud detection, virtual assistants, security, and investment management.
When it comes to their existing tech, upgrading open banking (81 per cent) and payment gateways (81 per cent) are high or very high priorities. These focus areas will help them tackle ongoing challenges by becoming more customer-driven and tapping into additional revenue.
