Finastra survey finds that US financial institutions increased tech spend by 25% to fund innovation, Banking as a Service (BaaS) set to impact the global banking sector
· 85% of respondents at global financial institutions believe Banking as a Service (BaaS) will make an impact over the next year; 40% believe the impact will be significant · More than 9 in 10 respondents agree that Open Banking is important to their organization; 97% of those that already use Open Banking recognize that it has provided benefits to their business · Financial institutions are more willing than ever before to collaborate and share data, with 4 in 5 banks (78%) reporting that shared data and infrastructure will quickly become the norm across the industry
New York, June 28, 2021: Finastra research reveals that global banks’ investment strategies for 2021 are shifting from defensive to offensive; defined by innovation, and with priorities centered on helping ‘cut costs or improve efficiencies’ (50%), ‘growing our business’ (46%), and ‘meeting current and future customer expectations’ (42%). In the same study conducted in 2020, ‘staying ahead of the competition’ was the number one driver of technology adoption and innovation. This year, beating out competitors didn’t even make the top three in a comprehensive survey of 785 professionals at financial institutions and banks in the US, UK, Singapore, France, Germany, Hong Kong and the UAE.
In the United States, financial institutions are tackling self-improvement initiatives with an average increase in technology spending of 25% (compared to a 9% increase globally). Still, budgets aren’t growing fast enough to match banks’ appetites for innovation. About 7 in 10 US financial institutions (69%) say their investments in technology and digital banking are constrained by cost pressures.
Meanwhile, Banking as a Service (BaaS) and embedded banking services are set to have a notable impact on the banking industry over the next 12 months, across all regions, with 85% of respondents at financial institutions anticipating this trend.
The ‘Financial Services: State of the Nation Survey 2021’, also finds that most organizations are now deriving the benefits of Open Banking and Open Finance, with the latter considered the natural evolution for the sector. Globally, 94% of those surveyed agree that Open Banking is important to their organization, with 63% reporting that it’s enabled them to improve customer experience and 59% stating that it’s helped attract new types of customers.
The research was conducted in March 2021 and explores the Open Banking and Finance landscape, the technology and initiatives set to make an impact in financial services over the next year, and how COVID-19 has impacted the sector.
Other insights include:
· Alongside BaaS, mobile banking and artificial intelligence are identified as the other top technologies which will be improved or deployed in the next 12 months. 95% of organizations are forecasting that they will look to improve or develop technology in this period. The UAE (44%) and Hong Kong (42%) lead the way when it comes to interest in mobile banking, compared to an average of 36% across all seven markets.
· Collaboration remains important to 94% of financial services institutions, though there remain several existing and new barriers surrounding regulation, security, and technology. Complex regulations have been identified as a significant barrier, with 40% of global respondents agreeing. France (47%), Singapore (45%) and Germany (44%) picked this as their number one barrier. An increase in security risk was identified as the top barrier by banks in the US, Hong Kong and the UAE (all 40%), while legacy systems and IT was cited as the top barrier to collaboration in the UK (48%).
· COVID-19 has acted as an accelerator for businesses to adapt and invest in new technology and innovation, according to 8 in 10 global organizations. Respondents in Singapore (87%), the UK (82%) and the UAE (82%) are most likely to agree.
· Financial services organizations are increasingly looking at their organizational purpose. 86% agree that ‘financial services and banking is about more than just finance, and we have a duty to support the communities we are serving’. At Finastra, we call this redefining finance for good.
“Our findings show how financial institutions are already benefiting from Open Banking and, new this year, a growing role for BaaS. We believe that these initiatives have already started paving the way to true Open Finance, helping financial services institutions to develop and enhance the services they provide to their customers,” said Eli Rosner, Chief Product and Technology Officer at Finastra. “For BaaS specifically, 81% of global respondents see it as a means to grow business, enhance their distribution channels, shorten time to market and streamline operations. Valuable insight from so many financial institutions sets the tone for the evolution of financial services as banks and their customers adapt beyond the pandemic and, together with the industry support they provide, serve their communities better.”
Notes to editors
1. 785 professionals (at managerial level) at financial institutions and banks across France, Germany, Hong Kong, Singapore, the UAE, the UK and the US, are included in our 2021 research. These financial institutions represent a gross total of just over USD$34 billion in turnover over the last 12 months, employ approximately 2.4m staff and have approximately 237 million client/customer/member relationships.
2. As a result of rounding up percentage results, the answers to some questions might not always add up exactly to 100%. Respondents were also able to select more than one answer for some questions.
3. Comparative analysis was made from results of similar surveys run by Finastra in January 2020 and March 2019 which were also conducted online amongst financial institutions and banks across the same markets (the 2019 survey did not include the UAE or Hong Kong).
4. Research was conducted by Savanta via an online panel (during March 2021).
Finastra is building an open platform that accelerates collaboration and innovation in financial services, creating better experiences for people, businesses and communities. Supported by the broadest and deepest portfolio of financial services software, Finastra delivers this vitally important technology to financial institutions of all sizes across the globe, including 90 of the world’s top 100 banks. Our open architecture approach brings together a number of partners and innovators. Together we are leading the way in which applications are written, deployed and consumed in financial services to evolve with the changing needs of customers. Learn more at finastra.com