Executive Summary: ISG Provider Lens™ Digital Banking Technology and Platforms - Global 2022
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ISG Provider Lens™ Digital Banking Services - Digital Payment Processing Platforms - Global 2022
ISG Provider Lens™ Digital Banking Services - Digital Wealth Management Platforms - Global 2022
A Study on Banking Platform
Providers The banking platform industry is poised for an overhaul. Emerging technologies such as AI, machine learning, blockchain and others have revolutionized customer experience (CX) and brought banks closer to their customers. In a world severely impacted by the pandemic, contactless delivery, remote working and flattening hierarchies are becoming the new realities; banks have gearing up to deal with the challenge by leveraging technology platforms.
It is to be noted that more than 70 percent of banks are moving to the cloud. Most of these institutions have been able to substantially reduce costs, increase agility and accelerate the time-to-market for their products. The platform players relevant here are supported by a robust ecosystem of third-party vendors.
Many banks are still undergoing transformation to build resilience in capital, talent and, most importantly, technology. According to ISG, they are transforming their infrastructure with phased migrations. While several banks have already started with this transformation, there are laggards that may still be able to progress if they take swift actions to accelerate technology modernization. Concurrently, payment platforms are also undergoing a makeover. They need to support multicurrency and multilingual, secure and compliant transactions. Similarly, wealth management platforms are providing robo advisory services and open platforms for third party integration.
This report studies vendor positioning in three quadrants and their relevant trends: Core Banking Platforms (with DBEH), Digital Payment Processing Platforms and Digital Wealth Management Platforms. Core banking is a system of engines and also functions as a book of records, while a digital banking engagement hub (DBEH) functions as a system of experience at the front-end. A DBEH helps banks gain deep insights and deliver personalized customer experiences across applications, devices and channels.
A digital payment processing platform facilitates transactions and processing among banks (both issuing and acquiring), merchants and customers. It serves both retail and corporate customers and provides low- and high-value, real-time and cross-border payments. Vendors also provide solutions by integrating analytics, automation and enhanced security.
A digital wealth management platform facilitates trading of wealth management assets such as mutual funds, equity, bonds, derivatives, private equity and commodities across countries, and in multiple currencies, for affluent and high-net-worth customers. Digital wealth management platforms provide automated tools and data-driven analytics to help banks serve these clients in wealth management.
ISG research reveals that while core banking upgrades are continuing to aim toward a complete digital platform, banks with legacy platforms are forced to deploy an open banking solution to retain their customer contacts and not be pushed aside by FinTechs and other non-banking competitors.
Electronic payments have gained tremendous traction and payment processing platforms need to build complete, manageable ecosystems to connect merchants, banks, credit card companies and customers seamlessly. Concurrently, increasing interest in goal-based financial planning, alternative assets, automated advice and focus on UX are revolutionizing the wealth management technology space.
ISG Provider Lens™ Digital Banking Technology Platforms 2022 study analyzes the solutions offered for banks in the global market in select segments. The findings from the analysis will help assess the product vendors based on the strength of their respective portfolios and their competitiveness in the market.
ISG notes the following key trends in the banking technology platform industry.
Cloud-based services help to counter competition from FinTechs and optimize costs: Contrary to the popular opinion that the veterans of the core banking platforms are out of reckoning, Temenos, TCS, Oracle, Infosys, Finastra, FIS and Fiserv are investing heavily in upgrading their platforms and modernizing their architectures. The traditional vendors are introducing their own cloud-native SaaS-based offerings. Banking as a Service (BaaS) helps banks partner with a FinTech or other non-financial institutions to provide financial products to their customers.
Cloud-native core banking gaining traction: With more challenger banks and neo-banks being launched globally, there is a need for rapid deployment of banking and lending services with focus on pure SaaS and cloud-native technology. This has benefited cloud-native core banking vendors like Mambu and Thought Machine.
Open banking and APIs providing additional revenues: To offset the lost revenues brought about by competition from FinTechs, banks are embracing modular ways of working or providing BaaS, allowing FinTechs to connect through open APIs. While a bank partner provides regulatory, compliance and domain expertise, FinTechs can ensure faster deployment and provide data mining.
Use of emerging technologies: Banks are incorporating emerging technologies such as AI, machine learning, robotic process automation (RPA) and blockchain and are leveraging data analytics to compile a 360-degree view of the customer and to provide hyper-personalized services.
Use of automation to reduce operational costs: Banks are focused on automating routine manual operations to reduce compliance and operational costs. Banks are also automating reporting, providing dashboards and setting alerts to reduce regulatory costs.
Rise of BNPL: Buy now, pay later (BNPL) allows retailers to offer installment payments for any product, even smallticket purchases – both online and instore. Banks are partnering with FinTechs to give customers BNPL options using existing platforms.
Central bank digital currencies (CBDCs) witnessing global adoption: Many central banks are exploring the potential of innovative technologies including the development of CDBCs. With the development of blockchain technologies, banks are also exploring the possibilities of blockchain-based CBDCs that can solve several vulnerabilities in the present banking infrastructure.
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