According to Allied Market Research, the open banking market is growing at 24.4%, reaching $43.15 billion by 2026, accelerating as a result of the Covid-19 pandemic, but part of an inevitable control shift in the financial sector. As the industry grows into open finance, financial services is beginning to fundamentally redefine customer interaction with the financial system by revising who creates and manages financial products and services.

This is an extract from the Finextra and Amazon Web Services (AWS) impact study on ‘Core banking on the cloud, the catalyst for innovation, agility and efficiency.’ Click here to read.

Considering Europe, DeVere Group stated that the use of financial applications and mobile banking services increased by 72% in the continent over one week because of the Covid-19 pandemic. Although this can be attributed to social distancing, remote working and quarantine measures put in place to contain the coronavirus, the shift to digital has long been cited as a necessary transformation in financial services. Customers expect more from their banks today, not least the real-time and tailored services that they are receiving from other industries or leading technology firms.

Top priorities for banks

Banks must incorporate an effective digital channel for their customers, while at the same time, reducing costs and prioritising operational resilience. While it may be premature to analyse the long-term impact of Covid-19, the most evident change has been the repositioning of online only models as the primary method of managing money.

Banks must continue to ensure customer experience is tailored by improving these digital channels. APIs fuelled by advanced analytics and advanced AI can continue to drive real-time personalisation – like what is provided by fintech firms, neobanks and challenger banks. McKinsey research validates that customers who receive personalised bank offers across multiple channels are more than three times as likely to accept, compared to those receiving offers through a single channel.

However, banks that do not host digital capabilities like their more innovative counterparts will struggle to remain viable competitors. One of the most significant challenges the financial services industry faces is how to keep pace with technology changes. Moreover, it can be arduous for banks to determine when the right time to modernise legacy systems is, or how much effort must be made to improve or support outdated platforms.

While legacy systems may be the foundation on to which all new functionality has been architected in the past, this could result in problems if applications were separated and in turn, capabilities not able to function efficiently. It must also be understood that the transferring of legacy systems and its data into a new environment can be a cumbersome process and any upgrade to new technologies must incorporate a holistic understanding of the bank’s alignment to business strategy, goals, and the current technology landscape within the bank.

Backbase, an engagement banking platform which offers an orchestration and aggregation layer allowing all parts of a modern, digital banking platform to be connected in a holistic manner, understands that 44% of the top 250 banks across Asia Pacific will complete their core transformation with platform-based, componentised modernisation and API-enablement.

With platforms that are core agnostic and cloud native, banks can own the end-to-end digital customer experience without ‘big bang’ transformations. This means that they can orchestrate omnichannel digital banking experiences, while aggregating value from underlying legacy and lean core systems with speed and ease.

In a similar fashion, configurable API-driven architectures, like those provided by Mambu, can enable banks to leverage technologies to realise business value, allowing digital solutions to be built all in the cloud. As this process requires very little coding, integrations can be built seamlessly, in a way in which reduces time to market, but also creates the conditions for creating flexible products in an agile environment at a fraction of the cost.

When migrating to the cloud, banks can access capacity on-demand to run real-time analytics to improve customer experience by recognising transaction patterns and anomalies. This enables banks to offer more personalised communications and more timely offers to customers.

This is an extract from the Finextra and Amazon Web Services (AWS) impact study on ‘Core banking on the cloud, the catalyst for innovation, agility and efficiency.’ Click here to read.