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​More retail banks using startups to replace legacy online and mobile banking systems

​More retail banks using startups to replace legacy online and mobile banking systems

Digital banking demands new technologies – and new vendors, reports Gartner

Gartner predicts that by the end of 2019, 25 per cent of retail banks will use startup providers to replace legacy online and mobile banking systems.

Banks face intense pressure to increase efficiencies and reduce costs while delivering next-generation digital services. However, incumbent application vendors have been slow to respond to new requirements, reports Gartner.

New vendors are emerging to meet both customer and bank needs for channel integration and dynamic customer experiences that make banking easier to accomplish on the devices customers want to use, says Gartner.

These vendors challenge the traditional — often incumbent — vendors of traditional online and mobile banking and core banking solutions.

"Startups and emerging providers of digital banking platforms offer banks interesting opportunities for innovation," says Bank CIOs should be prepared for extensive, potentially disruptive changes in this market,

The startup and emerging market segments for digital banking platforms offer bankers the opportunity to evaluate new providers. However, CIOs must prepare to manage the challenges of evaluating and selecting new vendor providers, states Cohen.

Partner with business peers to create collaborative teams that focus on customer problems, behaviour and needs, as well as customer requirements for services, before developing apps or selecting vendors or solutions

Stessa Cohen, Gartner.

She points out the market for digital banking platforms is “highly fragmented”. Vendors include incumbent bank niche vendors, mobile or online banking solution vendors, horizontal digital platform and customer experience vendors, system integrators, emerging digital banking vendors and startup digital banking vendors.

“Bank CIOs should be prepared for extensive, potentially disruptive changes in this market, including merger-and-acquisition activity, heightened competition and new entrants from other geographic regions,” she states.

“These new vendors may meet business and technical requirements for the bank's digital banking platform, but may not have proven track records in the financial services vertical or may simply be new and untried without an extensive customer base. Providers that are in the startup phase may pose challenge for CIOs who must justify investment in their solutions to their boards and regulatory agencies.”

Cohen, in the report Market Guide for Open Unified Digital Banking Platforms, advises bank CIOs to work with business leaders and other key stakeholders to assess the bank's comfort with, and ability to manage, the risks associated with using new providers, especially financial technology startups.

The bank CIOs need to focus on customer requirements before identifying vendors, states Cohen.

Partner with business peers to create collaborative teams that focus on customer problems, behaviour and needs, as well as customer requirements for services, before developing apps or selecting vendors or solutions.”

CIOs should also view digital banking platforms as a tool for creating a digital banking delivery architecture that will enable the bank to deliver services for increasingly diverse business use cases to an increasing number of devices, and allow a variety of possible ways for customers to interact with the bank and bank staff.

“This will encourage IT to think in terms of the mobility of banking services, not just on mobile devices, but among devices, browsers and operating systems — some of which may be smartphones and some of which may also be computers or ATMs,” she states.

“This change in thinking will drive an agile architecture that can support services the bank's customers require, rather than the transactions the bank supports.”

Read more: ​Co-operative Bank modernises core IT infrastructure with Unisys

Send news tips and comments to divina_paredes@idg.co.nz

Follow Divina Paredes on Twitter: @divinap

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