Banks Seize Competitive Edge Using Digital Platforms

Modern, cloud-based and as-a-service technologies help traditional institutions provide fast, online banking experiences, ISG Provider Lens report says

Many traditional banks around the world are meeting changing customer expectations and competing with new rivals by adopting digital banking platforms, according to a new research report published by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

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“Traditional banks are taking action to attract new business”

The 2022 ISG Provider Lens™ Digital Banking Technology Platforms global report finds consumers increasingly demanding quick, online banking experiences rather than traditional transactions inside bank branches. Cloud-native neobanks were launched to deliver those experiences, while older institutions are catching up by replacing multiple legacy systems with new platforms and services, typically taking a phased approach.

“Traditional banks are taking action to attract new business,” said Owen Wheatley, lead partner, banking and financial services at ISG. “Digital banking platforms can help them engage with customers and update their services, but modernization requires time and a sound strategy.”

Many digital banking platforms are cloud-based, and more than 70 percent of banks are currently moving to the cloud, the report says. Benefits of cloud migration include lower costs, greater agility and faster time to market for new banking products. However, given the high stakes of handling customers’ assets, most banks are migrating the systems that support new accounts and products while keeping their existing business on legacy infrastructure for now.

Some banks are beginning to offset revenue lost to new competitors by working with them, ISG says. By letting financial technology startups connect to their systems via open APIs, banks are taking advantage of modular Banking-as-a-Service (BaaS). While startups help them offer faster deployment and more advanced data analytics for customer support, the banks bring regulatory, compliance and domain expertise.

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“Partnerships with cloud-based platform providers are helping banks, especially smaller ones, compete cost-effectively,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Both core banking and payment processing are available as services, which cuts the time and expense of offering new products.”

New technologies are also transforming wealth management services, the report says. Capabilities including AI, machine learning, robotic process automation and trusted digital identification systems are now mandatory, especially for data analytics to support hyper-personalized services.

The report covers many other digital banking trends, including automation of manual tasks to cut costs, the rise of central bank digital currencies and how banks are participating in the growth of buy now, pay later (BNPL) services.

The 2022 ISG Provider Lens™ Digital Banking Technology Platforms global report evaluates the capabilities of 36 providers across three quadrants: Core Banking Platforms (with DBEH), Digital Payment Processing Platforms and Digital Wealth Management Platforms.

The report names Fiserv as a Leader in all three quadrants. It names Finastra, FIS, TCS and Temenos as Leaders in two quadrants each. ACI Worldwide, Adyen, Avaloq, Intellect Design, Infosys Finacle, Marqeta, NIUM, Oracle and Prometeia are named as Leaders in one quadrant each.

In addition, InvestCloud, Mambu and Volante Technologies are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.