5 Key Insights for Navigating the Current Landscape of Core Banking

In the last few years, the global banking industry has been rocked on all sides by evolving market and consumer demands, shifting regulatory requirements, and the rise of new and innovative technology. These conditions are poised to change the shape of modern banking for the foreseeable future. Rather than being linear, transaction-based service providers, contemporary banks are under pressure to transform into complex, dynamic, and flexible entities that can adapt swiftly to an unpredictable financial environment.

Banks today are facing a period of reckoning that requires them to reevaluate their current business models and prepare for an increasingly uncertain future. Many banks are specifically exploring technological upgrades in the interest of building a more agile, higher-performing core banking system. These upscaled systems will enable them to serve greater volumes of customers more efficiently, through more channels, and in a more personalized manner.

To pull off a successful technological transformation, however, banks must first understand the banking industry’s present condition, as well as the many challenges facing the sector as a whole. The following insights, in particular, are essential for banks to know about the modern core banking landscape:

Customers Have Embraced Digital Banking
The vast majority of banking customers today actively utilize digital technology in most, if not all, aspects of everyday life. Current studies assert that up to 67 percent of customers all over the world routinely bank through digital channels such as web-based platforms and mobile apps. This data suggests that today’s customers have come to expect convenient, seamlessly interconnected, and personalized financial services from their banks.

Moreover, while most customers report general satisfaction with the basic banking services available through these channels, many also hope for more complex transactions and services to become available digitally. More than 60 percent of surveyed customers, for example, would like the ability to open bank accounts and apply for loans online. As many as 69 percent say that they want the ability to utilize digital banking platforms and channels at every stage of their financial lifecycle.

Customers Can and Will Use Alternative Providers
Most banks operating today depend on legacy systems and technological infrastructure that have been in place for years, if not decades. Many remain skeptical of retiring these systems in favor of new technologies, fearful that the risks of the investment will significantly outweigh the rewards post-implementation. These banks have thus historically taken a conservative approach to exploring digital transformation, even if doing so frequently comes at the cost of serving customer needs efficiently.

The emergence of agile, digital-focused new competitors, however, is making it clear that traditional banks must adapt or face obsolescence within the next few years. Challenger banks, fintechs, and big tech organizations have already begun siphoning away digital consumers with attractive new offerings. Most of today’s consumers, in fact, have already tried a product or service from these non-traditional financial platforms. Additionally, many of those who haven’t tried non-traditional platforms say that they‘re open to doing so in the future.

Improving Openness and Interoperability Is Crucial
Traditional banks just beginning their innovation journey face the challenge of replacing bundled legacy infrastructure with microservices and component-based architecture. The systems they currently use are likely to be highly customized, dependent on laborious and extremely error-prone manual accounting processes, and closed, largely inflexible environments. These conditions make for a rigid system that’s ill-equipped to adapt to ever-changing business conditions and compliance requirements.

Fortunately, the latest advancements in banking technology have been designed expressly to help banks open up the banking core. Elevating incumbent systems with cloud computing, for example, can boost operational efficiency, cut costs, and reduce risk. Exploring intelligent automation options for basic processes can also ensure higher productivity and accuracy. Supported by a more robust technological base, bank staff then gain the freedom to focus on higher-value predictive and analytical tasks.

Innovation Is a Continuous Journey
The global health crisis has underscored the urgent need for financial institutions everywhere to become more flexible and adaptable. Banks must gain the business agility necessary to respond ably to unforeseen challenges and meet changing customer needs. In light of this, it’s important to bear in mind that innovation is not a one-time affair. Rather, it’s a continuous and ever-evolving process that banks should prepare to sustain throughout their lifespan.

Younger customers today are especially interested in financial institutions that can offer them personalized relationships and advice throughout their lives. The challenge for banks heading into the future, then, is to blend intelligent technology with genuine human engagement to create next-level customer experiences. To this end, it’s in their best interest to explore and leverage state-of-the-art innovations like artificial intelligence, machine learning, and cloud-based services.

Trust Remains of Paramount Importance
Because most banks tend to work closely with their customers long-term, consumer trust remains a major advantage that traditional banks have over their newer competitors. Furthermore, recent studies show that today’s banking customers continue to value brand affinity and trust just as highly as competitive rates and good experiences.

Overall, today’s customers tend to see banks not as simple service providers but as dependable partners who can help protect their financial interests throughout their lifetimes. Banks must prove themselves worthy of customer trust by working to improve their operational efficiency, tighten their data security, and personalize their customer service experiences.

Extensive knowledge of today’s core banking landscape is crucial for developing a sound, focused digital strategy that is truly responsive to the needs of the current times. Armed with this insight, banks can begin to explore technological solutions that help address their unique challenges and capitalize on their individual strengths.