Institute for Business Value (IBV), in collaboration with the Banking Industry Architecture Network (BIAN) and Red Hat, reveals significant gaps between the stated priorities of surveyed banking executives and the customers they serve, a new global report said. The report shows how consumers experience the digital world, dramatically impacting financial institutions.Consumers and businesses want the bank to come to them rather than going to the bank—physically or digitally.
Relying on traditional business models has curbed most banks’ abilities to recapture sustained profitability and more robust market capitalization.
Both banking leaders and consumers cited security as their most important priorities. Still, banking leaders overestimated the importance of peer-to-peer payments and buy now pay later (BNPL) compared to priorities cited by consumers who designated good customer experience as their second highest preference, followed by mobile wallet functionality and rewards, respectively.
Many consumers seek a higher level of engagement from their financial institutions, with 79% of younger respondents being open to receiving insights on their better ways to save and 75% being available for guidance on investing.
Embedded finance services can help improve business performance by expanding transaction volumes rapidly, capturing new customers, improving user experience, and adding new revenue streams.
Embedded Finance: Creating the Everywhere, Everyday Bank details findings from the responses of over 1,000 banking industry leaders and more than 12,000 consumers across five continents to identify emerging consumption patterns. Most consumers now apply for loans, manage investments, and purchase or renew car insurance online.
While 80% of consumers prefer to deposit their salary and keep their savings in traditional banks, 16% are already comfortable with a branchless, fully digital proposition.
Based on the study, gaps in technology infrastructure modernization, lack of application programming interface (API) standards, and the portion of resources devoted to privacy and security are slowing progress toward realizing the business opportunities associated with embedded finance platforms and stand to impede the potential of exponential technologies, such as generative AI.
“Banks are facing a double whammy of challenges with pressure coming from non-traditional competitors such as the big tech fins that have set new standards for customer expectations and are eager to deepen those relationships and from regulators pushing for open banking standards to level the playing field and drive more competition,” said Shanker Ramamurthy, Global Managing Partner Banking & Financial Markets, IBM Consulting.
“It has never been more critical for banks to focus on how financial institutions can increase their competitive edge and improve the experience they provide their customers. The findings from the research show just how much work banks have to do before they can achieve this,” said Hans Tesselaar, Executive Director of BIAN.“However, before they implement real changes to their service offerings, they must first overcome the obstacles caused by a lack of technical standards and adopt a coreless banking approach to transformation. It will help the industry benefit from every technological development to create the bank of the future.”
As clients become accustomed to hyper-personalized end-to-end experiences, they will be less willing to accept friction when accessing finance solutions. Establishing a modern hybrid cloud architecture that enables easy access to data across the enterprise, leveraging the potential of emerging technologies such as generative AI, and participating in a robust ecosystem of partners is paramount to a successful banking strategy in today’s industry.
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