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From artificial intelligence to regulatory compliance, the world of banking is moving at an incredible rate. Banks around the world are striving to adjust to a new landscape, which requires collaborative business models, new digital capabilities and higher levels of compliance.
Our annual Digital Banking Experience report features 792 senior decision makers in the financial services, banking and/or insurance industry from Africa, Asia, the Americas, Europe and the Middle East. It affords us a unique insight into how banks are adapting to this new landscape, year-on-year.
In this white paper, we consider some of the key changes that have occurred from our survey results in 2021 to those in 2022. By analyzing this rolling data, we can better understand the current state of the financial services industry, as well as where it might be going.
Our results show a big shift in the top priorities that banks are considering as part of their future vision and roadmap. As the graphs in this white paper show, all but one of the top five priorities have changed since the 2021 survey was taken, indicating that there have been significant developments in banks’ future strategies.
- Banks bolster cybersecurity and reconsider supply chains to focus on market trends and growth opportunities
- Environment, social and governance (ESG) concerns were introduced to the survey for the first time this year and immediately ranked second among top priorities, highlighting their importance
- “Leveraging emerging technologies to engage customers” remains a top-three priority for banks.
Highest growth expectation by initiative
Our survey shows that banks’ expectations around growth by initiative have changed significantly from 2021. By analyzing how these expectations have changed, we can see how banks have developed their capabilities in the past year, and adapted their strategies accordingly.
- Open banking and IT integration with partners have gone from top three high-growth expectations in 2021, to among the lowest ranked in 2022. This suggests that banks have reached a suitable level of maturity for IT, and instead are focusing on operating models in a changing economy
- Expanding into new markets and geographies remains high on the list of growth expectations, year-on-year
- New initiatives added to the 2022 survey – ESG, cryptocurrency and cybersecurity integration – all appear among the top five initiatives expected to provide growth by banks over the next three years.
There are plenty of roadblocks for banks on their way to increasing their digital capacities, many of which remain consistent from 2021 to 2022. In some cases (although not all), the priority and scale of these challenges have shifted, highlighting the maturity they gained on last year’s top priorities.
Furthermore, our survey results show the issues banks face entering into the digital ecosystem, as well as the importance they place on doing so successfully.
- In 2021’s survey, there was an eight-point gap between the biggest and fifth biggest digital banking challenge. This year, that gap is just three points, suggesting that the weight of challenges has become more diversified
- Data security remains a key challenge for banks, but it has become less prioritized than the interoperability of data, both internally and externally
- Legacy systems have moved from eighth in 2021 to third in this year’s survey, suggesting that banks are becoming increasingly cognizant to their need to tackle their legacy IT system problems.
Working with experienced partners is a tried-and-tested way for banks to better develop their digital banking strategies. By seeing which areas are most popular among our banks’ respondents can be indicative of areas where they are most lacking. According to our surveys from 2021 and 2022, banks continue to struggle (and therefore seek partnerships) with e-commerce, payments and credit/lending.
- The buy-in percentage for the top five partners has decreased in 2022
- While there is little change in terms of priority, automotive finance has risen as a current/potential partner
- The biggest drop was insurance providers, which lost eight percentage points from 2021 to 2022 and fell from fourth to eighth in the list of priorities.
Aggressive shift in investment
One of the biggest changes from 2021 to 2022 we have observed is banks’ investment plans around their top priorities. As the graphics in this paper show, there has been a significant shift in banks’ plans to invest, with far more banks expecting to increase investment by over 6% across almost all initiatives compared to last year.
- The year-on-year average for banks expecting to either “stay the same” or increase their investment in key priorities by between 1% and 5% has decreased by 11% and 7% respectively. However, the average for banks expecting to either increase by between 6% and 10% or more than 10% has gone up by 10% and 9% respectively
- The initiative “investing more in business-friendly, self-service visualization and analytics” has seen the most significant change. In 2021’s survey, 60% of respondents said they expected investment to either stay the same of increase by between 1% and 5%. In 2022, that number is just 26%, with the rest expecting investment to increase by at least 6%.
Banks are quicker at taking new products and services to market
One of the most remarkable changes we’ve seen between 2021 and 2022 has been banks’ huge reduction in time-to-market for new products and services.
- The number of banks with a time-to-market of over a year has halved since 2021
- Furthermore, more than twice as many respondents said they have a time-to-market of less than a month in 2022 compared to 2021
- Banks have far exceeded their own expectations, per the respondents’ three-year objectives given in last year’s survey.
Looking forward to 2023
The financial services industry may have changed but, as we’ve seen in this report, the banking sector is prepared to change with it. In just 12 months, we have seen a dramatic shift in banks’ willingness to work with third parties and partners in order to achieve success with their top priorities, as well as a significant boost in investment expectations to make it happen. Perhaps this points to a change in mentality among banking leaders, who are already reaping the rewards of vastly improved time-to-market speeds thanks to co-operating with ecosystem partners.
At the same time, however, we can see that banks face many similar challenges as they did last year. Concerns around data security and management are still rife, as well as the ever-present problem of legacy system technology. Interestingly, new challenges are becoming critical when embracing co-operation with ecosystems. And this shows. Ensuring data interoperability and flow between internal and external systems has become banks’ biggest challenge on their way toward the digital economy. We will see how close they are to resolution in our next annual report in 2023.
In the meantime, we will continue to analyze the data afforded to us from the wide-reaching and expansive survey, so check back regularly at resources.soprabanking.com for new insights around the current and future state of the financial services industry.