51% of financial institutions admit lag in digital innovation: Sanat Rao
KR Srivats New Delhi | Updated on October 21, 2019 Published on October 21, 2019
Sanat Rao, Chief Business Officer & Global Head, Infosys Finacle
Infosys Finacle's integrated cloud-based solution for Shivalik Bank
Digital transformation in the banking industry has a long way to go, despite banks worldwide clearly recognising that digital innovation is critical in remaining relevant and competitive, reveals a new report.
Only 17 per cent of banks that responded to a survey have deployed digital at scale, according to the 11th annual Innovation in Retail Banking report. This joint report, unveiled by Efma and Infosys Finacle, highlights the progress the industry has made in using digital innovations to transform customer experience.
Only 14 per cent of the respondents who consider their organisation to be a leader have deployed digital transformation at scale.
Results from this study suggest that in the next five years, the biggest threat to the banking industry will be from large technology companies, fintech start-ups and challenger banks. Over 75 per cent of banks think that consumer technology giants and fintech firms will lead banking innovation.
Barriers to digital change
The report said that 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. 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.
Majority of banks are not confident about how digital transformation impacted their organisational objectives.
Only 39 per cent of banks believe their digital transformation strategy has had high or very high impact in accelerating product and service delivery and 33 percent say it helped enhance innovation processes.
Only 14 per cent financial institutions believe they are innovation pioneers. A total of 51 per cent admit to being mainstream or lagging in innovation.
The industry's thinking on their business model of the future also displays a lag – as many as 50 per cent of respondents said their organisations would continue to operate as full stack banks across retail, business and corporate banking segments; only 26 per cent of respondents mentioned evolving towards platform/ open banking models such as marketplace organisation, manufacturing bank, and distribution-focussed organisation. The remaining plan to hone their focus on select customer segments.
'Need to transform design'
Sanat Rao, Chief Business Officer & Global Head, Infosys Finacle, said: "This year's report clearly underlines that while digital transformation has been at the forefront, few banks have managed to deploy digital at scale. Banks will need to transform culture, organisation design, operations and technology eco-system."
Vincent Bastid, CEO, Efma, said: "All players in the industry, whether it be banks, fintech start-ups, or technology companies, understand that in the midst of increasing digital transformation in financial services, placing the customer experience at the centre is critical to success."
The industry is increasing investments in mobility, advanced analytics and open banking APIs. More than 75 per cent of banks said Open Banking will attract a lot of new investment and 50 per cent of banks are considering co-innovation with business partners as a key strategy for innovation in the next 12 months.
However, most are not ready to apply these technologies to create expected business outcomes, shows the report. Only 30 to 35 per cent of respondents said their organisation was at a high or very high level of readiness with respect to open banking APIs and advanced analytics.