In the U.S, financial institutions are tackling self-improvement initiatives with an average increase in technology spending of 25%, compared to a 9% increase globally, according to Finastra’s Financial Services State of the Nation Survey 2021.
“That’s good news for financial institutions seeking to grow their business by moving toward open banking,” said Chris Zingo, SVP and General Manager, Americas at Finastra.
“Still, budgets aren’t growing fast enough to match banks’ appetites for innovation. About seven in ten US financial institutions (69%) say their investments in technology and digital banking are constrained by cost pressures,” he told Traders Magazine.
According to the survey’s respondents, 95% identify existing regulation as a main barrier.
Zingo said that regulation can be a good thing, but “by nature can also hinder innovation”.
“There can obviously be a fear of consequences or reluctance to make bold moves – especially in where customer data security is a perceived concern,” he said.
“On the flip side, it’s worth considering how smart innovation and technology investment can actually help safeguard data or help with other compliance initiatives. The right partnership – be it core system provider or startup fintech can actually serve as trusted advisors in navigating complex regulatory landscapes, and offer solutions that alleviate the financial institution’s burden,” he added.
Zingo said that COVID-19 accelerated everything digital and is reconfiguring everything physical: “It served as a forcing-function for the adoption of digital innovation, changing the way we considered digital through the lens of “the art of the possible” to something where innovation was needed now.”
The research reveals that banks are realizing that the best way to compete in the market isn’t by trying to keep up with the competition, but by ensuring that their customers remain at the heart of everything they do.
“I think financial institutions are embracing the idea that it’s about consumer empowerment and delivering a seamless experience. One way we’ve seen institutions doing this is by enabling open finance. Open finance puts the customer at the center of open banking and allows them to share their financial data across financial solutions, products and platforms, from bank to payroll, mortgage to 401k.”
“By linking all of these aspects, the consumer experience is improved, with greater ease and visibility into a complete financial picture. At its essence, it is the end result of what open banking can enable, driving meaningful benefits not just to the financial institutions, but the consumer as well,” he said.
Zingo also said that it’s important to note that this priority isn’t going away: “Our survey found that 95% of respondents noted that they are looking to improve or deploy new technologies in the next 12 months. It’ll be really interesting to see how the market embraces and adopts key drivers such as mobile banking, BaaS and AI.”
According to the findings, most financial institutions have improved or developed new technology in the past 12 months.
For example, the survey found that 25% of US based respondents believe that COVID-19 influenced their organization’s spend on digital banking and technology over the last 12 months.
“As a result of doing business via digital channels, a lot of financial institutions were forced to deal with issues relating to interconnectivity between channels and solutions, helping to reignite the conversation and value around cloud-based solutions,” explained Zingo.
He added that in some ways, the pandemic brought financial inequities into the light: “We now see financial institutions taking bold steps to rectify these issues. Finastra believes that finance could be a force of good in the world, benefiting society as a whole. We believe that technology can support this in many ways, from removing bias in lending to providing microloans to developing markets.”
Zingo believes that collaboration will be a key factor in the success of any financial institution.
“I am excited that concepts promoting collaboration are being embraced by the industry. With 95% of innovation coming from outside of an institution, it is vital to embrace open finance in order to continue to meet and exceed customer expectations,” he said.
“Reflecting on wider themes, financial services institutions are well positioned to demonstrate how collaboration can be used to help not only deliver better customer service and a better customer experience, but also demonstrate how it can be used as a tool to reduce cost and improve efficiencies. All in all, collaboration can be used as a vehicle to help foster innovation and help create new services or revenue streams for financial institutions,” he added.