But investments in new technologies are increasing
Three quarters of financial institutions are unable to fully leverage new payment methods and enhance cybersecurity due to outdated core systems, according to technology services provider Endava.
Its 2024 Retail Banking Report highlights the challenges financial institutions face in modernising their systems to meet customer demands.
Despite these challenges, three in four of the surveyed organisations believe they provide a strong user experience and possess superior technology and data management practices compared to their competitors.
More than half have also reported that they transitioned their core systems to the cloud, but they encountered issues with implementation, scalability, and management.
The main obstacles to adopting cloud-based cores include competing technical priorities (40%), insufficient technical resources (37%), fears of prolonged implementation times (32%), and concerns over fraud and security (29%).
Amid rising interest rates and inflation, financial institutions are focusing on becoming more profitable and retaining a loyal customer base. Their top priorities for the coming year include enhancing efficiency and customer retention (85% and 83%, respectively), improving digital customer experiences, maintaining system stability, and bolstering security to reduce fraud (each at 83%).
The institutions are also increasingly investing in new technologies such as artificial intelligence and data analytics, which are seen as crucial for real-time fraud detection and enhancing security. Upgrading open banking and payment gateways are also high priorities, viewed as essential for addressing ongoing challenges and driving customer-focused growth.
“FIs have come a long way in embracing the fact that modern banking and a cloud-based core go hand-in-hand,” said Fred Fuller (pictured), global head of banking at Endava. “Banks also recognise that migrating a legacy monolithic core to the cloud is not modernisation. They need to leverage modern digital technology to truly modernise the core to create a flexible and dynamic infrastructure that can quickly respond to customer and market demands.
“Although FIs think their technology is stronger than their competitors, the reality is that new features and functionality are usually built on old systems, which massively limits their scope for innovation.
“Working with technology partners who can implement and manage a new core will help them embrace customer-centric banking. This means being able to quickly roll out new products and services, as well as streamlining and securing their internal processes – all of which will help them hold onto market share.”
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