Banks Struggle to Meet Customer Expectations and Achieve Priorities, Hindered by Tech Challenges and Lack of Standards

Date:

Banks are struggling to meet customer expectations and achieve their priorities, hindered by technology challenges and a lack of industry standards, according to a new global study conducted by the IBM Institute for Business Value (IBV) in collaboration with the Banking Industry Architecture Network (BIAN) and Red Hat. The study reflects responses from over 1,000 senior banking leaders and more than 12,000 consumers, revealing significant disconnects between the two groups.

One of the key findings of the study is that 70% of banking executives indicate that embedded finance is either core or complementary to their business strategy, yet only 20% currently offer embedded finance solutions. Embedded finance refers to the integration of financial products and solutions within the customer journey of non-financial services organizations to enhance the customer experience.

The research also highlights the challenges faced by banks in terms of privacy and security in ecosystem innovation, with these challenges being cited as the top two barriers to innovation. Additionally, gaps in technology infrastructure modernization, the lack of application programming interface (API) standards, and the insufficient allocation of resources to privacy and security are slowing down the progress of embedded finance platforms and impeding the potential of emerging technologies such as generative AI.

While 80% of consumers currently prefer to deposit their salary and keep their savings in traditional banks, 16% of respondents globally are already comfortable embracing the full digital experience with branchless institutions. The study also reveals that many consumers are seeking a higher level of engagement from their financial institutions, with younger respondents being particularly open to receiving insights on better ways to save and guidance on investing.

See also  Credgenics Achieves Operational Profitability and Targets Rs 240 Crore Revenue This Fiscal Year

Both banking leaders and consumers agree that security is of paramount importance. However, banking leaders overestimate the importance of peer-to-peer payments and buy now pay later (BNPL) services compared to consumers, who prioritize good customer experience, mobile wallet functionality, and rewards.

According to Shanker Ramamurthy, Global Managing Partner Banking & Financial Markets at IBM Consulting, banks are facing challenges from non-traditional competitors and regulators pushing for open banking standards. To address these challenges, Ramamurthy emphasizes the need for banks to establish a modern hybrid cloud architecture, leverage emerging technologies like generative AI, and participate in a robust ecosystem of partners.

Hans Tesselaar, Executive Director of BIAN, highlights the importance of technical standards and a coreless banking approach to transformation in order for banks to benefit from technological developments and create the bank of the future.

The full report, titled Embedded Finance: Creating the Everywhere, Everyday Bank, is available for download.

In conclusion, the study reveals that banks are facing significant challenges in meeting customer expectations and achieving their priorities. Embedding finance into the customer journey is seen as crucial by banking executives, but currently, only a fraction of banks offer embedded finance solutions. Privacy and security challenges, along with gaps in technology infrastructure modernization and the lack of API standards, are hindering progress. However, consumers are increasingly seeking more engagement from their financial institutions, presenting opportunities for banks to improve their services and experiences.

Frequently Asked Questions (FAQs) Related to the Above News

What is embedded finance?

Embedded finance refers to the integration of financial products and solutions within the customer journey of non-financial services organizations. It aims to enhance the customer experience by providing financial services seamlessly within existing platforms or services.

How many banking executives consider embedded finance as core or complementary to their business strategy?

70% of banking executives consider embedded finance as either core or complementary to their business strategy.

How many banks currently offer embedded finance solutions?

Currently, only 20% of banks offer embedded finance solutions.

What are the top barriers to innovation in the banking industry?

The top barriers to innovation in the banking industry are privacy and security concerns. These challenges are cited as the main obstacles faced by banks in terms of ecosystem innovation.

What factors are impeding the progress of embedded finance platforms and emerging technologies?

The progress of embedded finance platforms and emerging technologies is impeded by gaps in technology infrastructure modernization, the lack of application programming interface (API) standards, and insufficient allocation of resources to privacy and security.

How many consumers currently prefer traditional banks for depositing their salary and savings?

80% of consumers currently prefer traditional banks for depositing their salary and savings.

How many consumers are comfortable with fully embracing the digital experience with branchless institutions?

Globally, 16% of consumers are already comfortable with fully embracing the digital experience with branchless institutions.

What are consumers seeking from their financial institutions?

Consumers are seeking a higher level of engagement from their financial institutions. They are particularly open to receiving insights on better ways to save and guidance on investing.

What do banking leaders and consumers prioritize in terms of financial services?

While both banking leaders and consumers agree that security is of paramount importance, banking leaders tend to overestimate the importance of peer-to-peer payments and buy now pay later (BNPL) services. Consumers, on the other hand, prioritize good customer experience, mobile wallet functionality, and rewards.

What are some recommendations for banks to address the challenges they face?

Banking leaders can address the challenges by establishing a modern hybrid cloud architecture, leveraging emerging technologies like generative AI, and participating in a robust ecosystem of partners. These steps can help banks compete with non-traditional competitors and meet regulatory requirements for open banking standards.

Where can I find the full report on embedded finance?

The full report, titled Embedded Finance: Creating the Everywhere, Everyday Bank, is available for download.

Please note that the FAQs provided on this page are based on the news article published. While we strive to provide accurate and up-to-date information, it is always recommended to consult relevant authorities or professionals before making any decisions or taking action based on the FAQs or the news article.

Share post:

Subscribe

Popular

More like this
Related

Railtown AI Partners with Amii for Groundbreaking AI Project

Railtown AI partners with Amii to accelerate AI initiatives and develop groundbreaking technologies in Canada.

Tech Veteran Mark Halberstein Shares Secrets to Building Successful Superapps

Discover the secrets to building successful superapps from tech veteran Mark Halberstein. Find out more in this article summary.

Global Water Crisis Escalates: Urgent Strategies Needed Now

The global water crisis is worsening due to climate change. Urgent strategies are needed to address water scarcity and contamination now.

Groundbreaking Study: Paralyzed Patients Speak with Power of Thought

Groundbreaking study reveals paralyzed patients can speak through thoughts. Discover how this discovery could transform communication for individuals with severe disabilities.