Modern technology is at the forefront of growth and innovation in almost every business. The likes of Amazon, Netflix, and others who embraced digital as their core competency have leapfrogged the competition and achieved differentiation and success of a higher order. The pandemic has merely accelerated a journey of digital disruption across all verticals.
The Story Is No Different in the Financial Services Industry.
Today, when customers bank, they want the experience to be as seamless and personalized as shopping on Amazon or searching on Google. With the emergence of open banking and embedded finance, they can indeed enjoy such experiences by routing their financial transactions through third party digital providers, including big tech, fintech, and challenger banks. And they’re migrating in droves – in 2000, more than 50 percent of bank transactions occurred in physical channels (branches, ATMs, and call centers); by 2021, 70 to 95 percent of bank transactions had moved to bank-owned digital channels. Now, customers are routinely conducting financial activity on non-bank channels, leading to the expectation that in 2025, third party digital providers will carry 20 to 50 percent of all bank transactions worldwide. The pandemic is further fueling this trend to allow new entrants and new business models to flourish with unprecedented speed: in the EFMA Infosys Innovation in Retail Banking 2021 survey, respondents said they expected challenger banks and fintech companies to lead innovation even in core banking services, such as checking accounts and lending, over the next five years.
To hold their own in these competitive conditions, incumbent banks will have to step up their digital transformation initiatives. Those who made digital themes central to their vision and strategy have not only gained competitive advantage, but also scaled new frontiers, often delivering digital engagement and experiences on par with digitally born pioneers in other industries. They have also been able to explore open banking opportunities and innovative business models.
However, many others are falling behind, with their efforts at digitization hampered by sluggish legacy infrastructure. As progressive organizations embrace the latest digital tools and technologies, from AI and cloud to APIs and low code platforms, the gap between digital leaders and laggards will widen further. It is imperative for banks on the wrong side of the divide to migrate to a modern technology platform so they can transform quickly, at scale, to be fit to compete in the age of digital banking.
The good news is that core modernization has made significant strides in the last decade and so is nowhere as cumbersome or protracted as it used to be. The most popular platforms are componentized to enable the existing solution to be upgraded progressively, and being cloud-native, are immensely scalable. Thanks to composable architecture, discrete capabilities can be composed quickly into interesting products. Open APIs/ RESTful APIs support the adoption of new business models, such as Banking as a Service.
An industry leader in core banking, digital engagement, corporate banking, and payments, the Infosys Finacle platform has all the above attributes and more. We have helped clients in more than a hundred countries transform into agile, scalable, and open enterprises, ready to benefit from new-age possibilities. If your financial institution is ready to begin its transformation journey, please contact us at Finacle. We would love to tell you more about our banking platform.
