Banks
face intense pressure to increase efficiencies and reduce costs while
delivering next-generation digital services; however, legacy application
vendors have been slow to respond to new requirements, according to a new
report from Gartner, Inc.
Gartner predicts that by the end of 2019, 25 percent of
retail banks will use startup providers to replace legacy online and mobile
banking systems.
New
vendors are emerging to meet both customer and bank needs for channel
integration and dynamic customer experiences that make banking easier to
accomplish on the devices customers want to use. These vendors challenge the
traditional — often incumbent — vendors of traditional online and mobile
banking and core banking solutions.
“Startups and emerging providers of digital banking platforms
offer banks interesting opportunities for innovation,” said Stessa Cohen, research
director at Gartner. “However, CIOs must prepare to manage the challenges of evaluating
and selecting new vendors that may not have proven track records in the
financial services vertical or may simply be new and untried without an
extensive customer base. It can be difficult for CIOs to justify investment in
their solutions to their boards and regulatory agencies, but don’t use that as
a reason to exclude new vendors.”
Gartner
advises bank CIOs to work with business leaders and other key stakeholders to
assess the bank's comfort with, and ability to manage, the risks associated with
using new providers, especially financial technology startups.
Legacy Vendors Slow to React
One of the most
important reasons the market for digital banking solutions has opened up is
that most legacy vendors that offer bank channel applications — for both
consumer and business customers — have been slow to react to new customer
requirements.
Incumbent vendors offer traditional online and mobile banking solutions and integration with core banking systems, but often do not support open architectures that decouple the presentation of services from the services and transactions themselves and, crucially, enable the bank to bring new and existing processes together to offer innovative digital services.
As a result of both customer and bank IT and business requirements, new vendors have emerged with digital banking capabilities that enable bank business and IT staff to offer apps and applications that support personalized, customer-centric banking experiences, data and behavioral analysis, location and context sensitivity and creation of a partnership ecosystem to create new services leveraging partner data, transactions and processes.
“This is why many
banks developing digital banking strategies to meet customer demands have
sought out new providers to replace their existing online and mobile banking
solutions with digital banking platforms,” said Ms. Cohen.
Open Unified Digital Banking Platforms
Digital banking
platforms may include a broad range of capabilities — including financial
management, payments, marketing, loyalty, analytics and customer communication
management — that enable bankers to support a variety of customer experiences
across any number of channels.
Open unified solutions make it possible to deliver new digital products and services, and create a multidimensional customer experience across all digital channels. They provide multichannel integration in an architecture that enables the bank to develop and deliver services for both bank staff and customers, via any device or channel.
Gartner views open unified digital banking platforms as an
emerging technology, even though some of the solutions on the market, including
some from niche banking system vendors, have been available for several years.
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