In November 2020, Banking Circle surveyed 300 senior decision makers at banks across Europe. Our aim was to discover the challenges banks face serving customers in the new digital age and how they intend to overcome them.
What was immediately apparent is that a major underlying issue is maintaining outdated legacy systems, combined with the cost inherent in correspondent banking. These two factors appear to be holding banks back, restricting them from developing and delivering the services that their corporate customers now desire in an increasingly digitalised landscape.
All organisations in the payments sector are facing a rapidly growing demand for instant access service options, driven by the world becoming more digital and consumers being more comfortable with transacting online. This trend is quickly becoming an expectation in the B2B payments space, with not just banks finding themselves in this new digital ‘instant access’ realm, but Payments businesses of all kinds.
What’s more, there is no doubt that COVID-19 has accelerated this digital transformation across all industries, including the drive to online and on-demand banking. So how do banks keep up with demand?
The Payments landscape
Customer satisfaction is ultimately what drives the payments industry. Gone are the days of cashing a cheque that takes a week to clear – consumers want a frictionless payment experience, meaning merchants and the Financial institutions they work with have to provide it. There are expectations for real-time and cross border payments, combined with offering a range of services from Virtual IBANs and multi-currency accounts through to foreign exchange. The pressure is on, and if banks are to stay ahead of the innovation curve, agility and staying ‘relevant’ will be key.
If you’re a business, it’s clear that not just your own legacy tech you need to worry about, but that of your suppliers too – and financial providers in particular. The entire ecosystem needs to be innovating, no one can afford to have a weak link in the chain and that’s why banks risk being pushed out of the picture.
Merchants are increasingly partnering with Payment Service Providers (PSPs) and Payment technology companies such as Stripe because working with forward-thinking Payments businesses means increasing their payment offerings and keeping up with customer demand. Critical in this the new e-commerce dominated environment. As such, many traditional banks with their legacy tech are left playing catch-up.
More from Guides
- Hiring a Solicitor: Why Professional Representation Matters
- Choosing The Best PDF Merger
- A Guide To Moving To Florida As A Digital Nomad
- 10 Hybrid Event Ideas for Startups
- Top 10 Apps For Streamers
- 10 Apps To Speed Up Your PC In 2024
- Top 10 Eco-Friendly Tech Toys For Children
- Top 10 Benefits of Offshore Recruitment Process Outsourcing (RPO)
The legacy tech conundrum
Built generations ago, in a very different landscape and with very different technology available, big banks have struggled to keep pace with newer entrants unencumbered by legacy technology and regulation. Incumbent banks still use the monolithic systems and in-house servers on which they were originally built, which means implementing updates or introducing new offerings incurs significant time and cost. Indeed, our recent research found 42% of bank executives surveyed said existing legacy IT infrastructure is one of their three biggest internal challenges.
The key to solving the legacy tech conundrum is working with an innovative partner. Collaborating with a third party allows a bank to respond to customer expectations and catch up with the competition; all without the need to invest the significant time and funds required to replace legacy systems and overhaul their own infrastructure. And banks clearly see the benefit. Half of those surveyed already have partnerships or plan to work with an external provider within a month, while another third have partnerships on the agenda for the next 12 months.
In particular, a technology partner with cloud-based architecture at its core will help banks future-proof their offering. Cloud-based technology is highly scalable and provides additional capacity and functionality exactly where it is needed. This means banks have access to a partners agile development options, continuous upgrades and unparalleled resilience. In short, a cloud-based partner can take care of all the heavy lifting, allowing banks to meet the needs of a global marketplace that is increasingly becoming e-commerce focused.
2020 taught the world the importance of working together and supporting each other. If banks – and all businesses for that matter – are to overcome the barriers that legacy technology create, it’s important they take these lessons to heart and open themselves up to collaboration with external providers. Ultimately, customer demands and expectations will only increase, and this is how to stay ahead of the curve.
Written by Anders la Cour, CEO and co-founder of Banking Circle. Banking Circle is a tech-first bank that provides financial infrastructure to Payments businesses and Banks. As a fully licenced bank, free of legacy systems, Banking Circle technology enables payments companies and banks of any scale to seize opportunities in the new economy.