The baking industry, despite the rise of fintech startups, has been slow in adopting digital solutions. Only 17% of banks have succeeded in digitally transforming at scale, says a report by Infosys Finacle, a digital banking application provider and Efma, a not-for-profit organisation for retail financial marketing and distribution.
Legacy systems and system integration challenges are still perceived as the biggest barriers to digital transformation. Time and cost required to realise real value are other obstacles in the banks’ digital journeys, according to the 11th edition of the Innovation in Retail Banking report.
Only 39% of banks believe that digital transformation has had a high or very high impact on accelerating product and service delivery. Only a mere 33% stated that it has helped enhance their innovation process.
While 14% of the respondents said they were innovation pioneers, 51% felt they were mainstream or lagging in innovation. About 350 banks and financial services participated in the current research. Infosys Finacle is a part of EdgeVerve Systems, a wholly-owned subsidiary of Infosys
There was a prominent lag in the industry’s thinking on the business model of the future, with as many as 50% of respondents stating that their organisations would operate as full-stack banks, while a paltry 26 percent mentioned evolving towards open banking models.
Some of the open banking models of today include marketplace organisations, manufacturing banks and distribution-focused organisations.
However, when it comes to investments in innovation, the industry seems to be increasing investments in mobility, advanced analytics and open banking application programming interface.
A healthy 75% of respondents felt that open banking would attract a lot of new investments while 50% of banks were considering co-innovation with business partners as a strategy for innovation in the next 12 months, the report said.
A whopping 88% also said that they were increasing investments to improve customer experiences, while 79% were investing in new products and services. 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.
Large technology companies and fintech startups will pose a major threat to the banking industry over the next five years, the report said.