ISG Momentum® Strategic Perspectives - Ecosystem Banking: A Spectrum of Opportunity for Technology and Service Providers
Traditional core banking services is passé. Customer experiences defined by social media platforms, entertainment, and retail for example, is setting the tone for delivering banking services as well.
Seizing the opportunity to engage with the new age customer, are the disruptive companies that have investors pouring money into them. These digital first banks, aka FinTech’s have raised $33.9 billion worldwide, in 2019 alone. Amidst the heightened competition and the need to deliver differentiated and bespoke customer experiences, several banks are implementing multibillion-dollar, multiyear digitization projects.
However, to unlock the transformation of banks to a provider of services that extends beyond traditional banking services; collaboration is key. Modernization via partnerships with fintechs or other technology companies is often a more palatable solution than a complete legacy technology overhaul, which can create overwhelming technical debt.
Partnerships with financial startups for example, enable banks stay agile and responsive to customer demands. The risks and costs of revamping the old, complex IT systems are often too much for banks to bear. Therefore, banks look to integrate their core systems with third-party tools, which is a more convenient, cost-effective approach and curtails the bank’s downtime risk. This approach allows banks to continue their activities based on their core system and retain customers with innovative services.
For example, Standard Bank, the biggest financial group in Africa, has partnered with Amazon Web Services (AWS) to enhance customer-facing web and mobile applications. The bank will take advantage of the analytics and machine-learning (ML) capabilities of AWS to advance fraud detection and introduce new services, such as ML-based advisor capabilities that will help customers make more informed financial decisions.
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