Post covid, platform-based banks will find it easier to increase profits: Report
2 min read 12 Jun 2020, 11:58 AM ISTCovid-19 has accelerated the urgency for digital transformation and banks may need to take a more pragmatic approach to transformation to pursue their journey towards Open X
PremiumMUMBAI: Retail banks face pressure to transform as entrants focused on customer experience gain significant market traction, according to World Retail Banking Report 2020 (WRBR) published by Capgemini and Efma.
As the covid-19 pandemic prompts people to adopt digital interactions, platform-based banks will be better at offer agility and scalability. The report found that such banks will find it up to two times easier to increase operating profits, unlock new sources of value, and improve operational efficiencies.
With over half (57%) of consumers now preferring internet banking, up from 49% pre-Covid-19, and 55% preferring banking mobile apps compared with 47% previously, the stakes have risen further, the report said.
Bank executives recognise the obstacles to moving to a platform model. The report found that 80% of bank executives cited cybersecurity and privacy concerns, outdated data management (68%) and identifying right partners (73%) as primary barriers to moving to a platform system.
The report suggests that while covid-19 has accelerated the urgency for digital transformation, banks may need to take a more pragmatic approach to transformation to pursue their journey towards Open X given these uncertain times.
Capgemini's “Open X Readiness Index" is a global benchmarking tool that measures the readiness of banks to effectively collaborate at scale with startups by measuring their maturity across people, finance, business, and technology pillars.
"Consumers expect a seamless digital experience from their financial providers, as they’ve grown accustomed to BigTechs in other parts of their lives. Traditional banks are being challenged to meet these expectations given that digitally native new entrants focus on customer experience from day one," said Anirban Bose, chief executive, Capgemini’s Financial Services and Group Executive Board Member.
Having prioritised near-term profits over long-term sustainability, some banks have an accumulation of legacy systems in place. This situation makes it a challenge to integrate emerging technologies, which is affecting customer experience and operational excellence. But legacy system challenges and advantages of a modern core notwithstanding, banks are reluctant to take transformative action because resources required and risks associated with inefficient implementation.
"Covid-19 has put a spotlight on the digital banking experience," says John Berry, CEO of Efma. “The modernization of legacy systems must be prioritized by banks looking to accelerate their growth as customer expectations are ever increasing and those that neglect this risk falling behind."
The Open X model also helps banks lower operational costs and move from a high fixed investment in IT development to a more cost-effective and flexible cost model that incorporates specialized players in the ecosystem.
