New study reveals banks struggle to achieve priorities, meet customer expectations hampered by technology modernization challenges and lack of industry standards

– New global study reflects responses from more than 1,000 senior banking leaders and more than 12,000 consumers regarding their priorities and identifies significant disconnects

– 70% of bank executives indicate that embedded finance is either core or complementary to their business strategy, but only 20% currently offer embedded finance solutions

– Ecosystem privacy and security challenges cited as top two barriers to innovation

September 14, 2023

ARMONK, NY and FRANKFURT, Germany, September 14, 2023 /PRNewswire/ — The IBM (NYSE: IBM ) Institute for Business Value (IBV), in collaboration with the Banking Industry Architecture Network (BIAN) and Red Hat, today released findings from a new global study that reveals significant gaps between the priorities of interviewed bank managers and the customers they serve. The research examines how customers engage with the digital world and how banks are investing in embedded finance to become part of the financial journey consumers experience on their preferred platforms.

Embedded Finance: Creating the Everywhere, Everyday Bank details findings from the responses of more than 1,000 banking industry leaders and more than 12,000 consumers across five continents.

Embedded finance is the integration of financial products and solutions within the customer journey of non-financial services organizations in ways that help eliminate friction, and consequently enrich the customer experience. More than 70% of the business executives surveyed indicate that embedded finance is either core or complementary to their business strategies. Yet only 20% said they currently offer embedded financing solutions.

“Banks face 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. “Establishing a modern hybrid cloud architecture that enables easy access to data across the enterprise, the ability to harnessing 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. “

While 80% of all consumers surveyed currently prefer to deposit their salary and keep their savings in traditional banks, 16% of respondents worldwide are already comfortable embracing the full digital experience with branchless institutions. Many consumers are looking for a higher level of engagement with their financial institutions with 79% of younger respondents open to receiving insights about their better ways to save and 75% open to guidance on investing.

Both bank leaders and consumers cited security as their top priorities, but bank leaders overestimated the importance of peer-to-peer payments and buy now pay later (BNPL) compared to priorities cited by consumers who ranked good customer experience as their second highest preference. followed by mobile wallet functionality and rewards respectively.

Based on the study, gaps in the modernization of technology infrastructure, a lack of application programming interface (API) standards and the portion of resources devoted to privacy and security slow progress in realizing the business opportunities associated with embedded finance platforms is and can be the potential of exponential technologies, such as generative AI.

“It has never been more critical for banks to focus on how financial institutions can increase their competitive advantage and improve the experience they offer to their customers. The findings of the research show just how much work banks need to do before they can achieve.” said Hans Tesselaar, Executive Director, BIAN. “However, we know from the work we do with our members that before they can implement real changes to their service offerings, they must first overcome the obstacles caused by a lack of technical standards and take a coreless banking approach to transformation. will help the industry take advantage of every technological development to create the bank of the future.”

The full report is available to download here.

The IBM Institute for Business Value, IBM’s thought leadership think tank, combines global research and performance data with expertise from industry thinkers and leading academics to deliver insights that make business leaders smarter. For more world-class thought leadership, visit: www.ibm.com/ibv

About IBM IBM is a leading provider of enterprise AI, hybrid cloud architecture, security and ESG insights for the global financial services sector. Its deep industry expertise, extensive portfolio of services and solutions, and its robust ecosystem of fintech partners empower collaboration, innovation and creation with clients. As a trusted partner to banks, insurers, capital markets and payment providers, IBM guides financial institutions at all stages of their digital transformation journeys through IBM Consulting and delivers the proven infrastructure, software and services they need through IBM Technology. For more information, visit www.ibm.com/industries/financial-services.

About BIAN Founded in 2008, the Banking Industry Architecture Network (BIAN) is an independent, non-profit, member-owned association designed to build and promote a common architectural framework for banking interoperability issues. BIAN’s goal is to define operability and “ready to use” definitions for IT services in the banking industry.

The community of more than 80 members focuses on creating a standard banking services landscape, while ensuring consistent service definitions, levels of detail and boundaries. This will help banks achieve a reduction in integration costs and benefit from a microservices architecture.

Financial institutions, software vendors, consultants and system integrators, along with technology partners, are invited to join the association and play a collaborative role with other industry leaders in defining, building and implementing next-generation banking platforms.

Media contacts

IBM
Mary Ellen Higgins[email protected] 781.789.1911

BIAN
Olivia RashidHotwire [email protected] 020 8875 4450

SOURCE IBM