90% of banks expect to become an open bank within three years

Efma feature

12 December 2017

A new report by Efma, in collaboration with Gartner, explores banks’ views about digital transformation, how it will affect them, and how they can make it work.

Banks are convinced of the need to embrace digital banking and to transform themselves, according to a survey by Efma in collaboration with Gartner. However, there is less certainty about how what that ambition really means, how it will affect them and how to make it work in practice.

The “Digital business in banking” report, published on 12 December, gives insights into the attitudes of 75 banking organizations towards digital banking, and provides guidance and recommendations to help them achieve success. It observes that banks are convinced of the need to embrace digital banking and transform themselves, and ambitious in their endeavors to do so. Some 90% of banks surveyed expect to become an open bank within three years. A substantial proportion of the IT budget is being devoted to digital banking or bank transformation projects, and a large majority of banks actively embraces initiatives such as innovation, fintech and hackathons.

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But several obstacles are slowing the pace of progress. Many banks are struggling to achieve the cultural change they need in the face of internal resistance from both technology and business camps. As a result, the report says, many organizations are focusing on low-risk internal digital platforms that only automate or refresh old processes, business models and value propositions. There is also a tendency to propose technical solutions to nonexistent business problems. Overall, banks find it difficult to define what “digital banking” and “digital platforms” really are, how digital banking will affect them, and how to make it work in a secure, robust and profitable way.

In answer to these questions, the report provides clear definitions of digital banking and digital platforms and explores their importance to banks. It advocates that CIOs with responsibility for the digital bank should help their peers to understand these issues and the new business models enabled by digital, and speed up the process of devising a concrete strategy for addressing them.

However, building the digital platform is not enough, the report cautions. Banks need to establish a clear vision of the problems experienced by customers and employees and of the business without those problems. This will enable them to purposefully build a business ecosystem with intelligence at the center, which should be adopted by global operations.

The survey shows that CIOs and other leaders in banks are convinced that the major barrier to open Banking, and to innovation in general, is cultural. Overcoming this barrier demands a new mindset from digital leaders, and the report makes several recommendations including cultivating a culture of innovation and creativity, cherishing top-notch digital talent and exploiting the “competitive levers” of the digital era such as fintechs that can become part of the bank’s ecosystem.

Ultimately, the report says, banks need to adopt a mindset that reverses many of the old assumptions. By doing so, they will enable themselves to become a truly digital bank.

Download the report

Keywords : Business strategy/Model , Digital/Mobile channels , Bank Products & Services , API/Open banking

Geography : International