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Only 17% of banks have deployed digital at scale – report

22 Oct 2019
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Infosys Finacle, part of EdgeVerve Systems, a wholly-owned subsidiary of Infosys and Efma have unveiled the 2019 edition of the Innovation in Retail Banking report.

In its 11th year, the joint report explores the evolution of digital transformation and how banks have adopted and scaled it throughout their organisations.

More than 350 banks and financial services companies globally took part in the report.

It is authored by Jim Marous, publisher of the Digital Banking Report and co-publisher of The Financial Brand.

Highlights of the report are:

Scale of Transformation

Digital transformation in the industry has a long way to go. Even today, only 17% of banks have succeeded in digitally transforming at scale.

Legacy technology and system integration challenges are perceived as the biggest barriers to digital transformation, followed by time and cost required to bring concept to reality.

Majority of banks are not confident about how digital transformation has successfully impacted their organisational objectives.

Only 39% of banks believe their digital transformation strategy has had high or very high impact in accelerating product and service delivery and 33% say it has helped enhance innovation processes.

State of Innovation

Very few financial institutions – just 14% – believe they are innovation pioneers. 51% admit to being mainstream or lagging in innovation.

The industry’s thinking on the business model of the future also displays a lag – as many as 50% of respondents said their organisations would continue to operate as full-stack banks across retail, business and corporate banking segments; only 26% of respondents mentioned evolving towards platform/ open banking models such as marketplace organisation, manufacturing bank, and distribution focused organisation. 

The remaining organisations plan to hone their focus on select customer segments.

Investments in Innovation

The industry is increasing investments in mobility, advanced analytics and open banking APIs.

These technologies are expected to make the biggest impact on banking in the next 12 months.

More than 75% of banks said Open Banking will attract a lot of new investment.

50% of banks are considering co-innovation with business partners as a key strategy for innovation in the next 12 months.

Looking beyond efficiency, 88% of banks said they are increasing investment to improve customer experience, while 79% are investing towards new products and services.

Future Outlook

While banks expect mobility, advanced analytics and open banking APIs to impact their business the most in the coming year, most are not ready to apply these technologies to create expected business outcomes.

Only 30 to 35% of respondents said their organisation was at a high or very high level of readiness with respect to open banking APIs and advanced analytics.

In the case of Blockchain or Internet of Things, the percentage of respondents with high or very high readiness dropped to 12 and 13% respectively.

Results from this study suggest that in the next 5 years, the biggest threat to the banking industry will be from large technology companies, fintech startups and challenger banks.

More than 75% of banks think that consumer technology giants and fintech firms will lead banking innovation.

Customer experience is expected to see the maximum evolution over the next 3 years.

Infosys Finacle chief business officer and global head Sanat Rao says, “The Innovation in Retail Banking report has been a valuable guide to banks for over 11 years now, with deep and useful insights about the global banking industry.

“This year’s report clearly underlines that while digital transformation has been at the forefront, few banks have managed to deploy digital at scale.

“Digital deployment at scale needs a whole new way of thinking, designing and executing to permeate the enterprise. Banks will need to transform culture, organisation design, operations and technology ecosystem,” says Rao.

“The secret sauce lies in doing all of this successfully, simultaneously. During such a transformational journey, studies such as this one enables banks to benchmark their approach with industry peers.”