By Roy Urrico
Can disruptive technologies bolster the competitiveness of North American financial institutions? That is the focus of a study by research and analysis organization Economist Impact and commissioned by Geneva, Switzerland-based fintech Temenos. The report explores emerging trends in the North American financial services industry as compared to other international regions.
The report found North American financial institutions no longer trailing global counterparts in adopting modern technology. According to this latest Economist Impact/Temenos study, North American financial institutions now count on technology upgrades to modernize legacy systems to allow them to compete with non-traditional players.
“The fear of being left behind and missing out on new markets is pushing North American financial institutions towards a greater adoption of disruptive technologies, with the goal of modernizing and securing their core infrastructure and personalizing customer experience and engagement,” said Nelly Rezny, executive vice president, business solutions group – Americas, Temenos.
Rezny added that tech investments are also helping financial institutions compete with fintechs and non-financial companies, both on their traditional turf and in newer spaces. This includes areas such as embedded finance, where banking competitors have led the way.
The report drew its conclusions from a global survey of 300 banking executives in retail, commercial and private banking. It reached participants in Europe (25%), North America (23%), Asia Pacific (18%), Middle East and Africa (17%), and Latin America (17%). Five North American credit unions participated in the survey.
Backing Technology
A major focus of the study is how North American financial institutions overwhelmingly believe that technology will have the biggest impact on their industry — much more so than financial institutions in other global regions.
Even more respondents in North America are convinced than those in other regions (90%, compared with 63% globally) that technology will be the trend to have the biggest impact on financial institutions in their country in the next five years.
Many of those North American organizations already invest in a wide range of technologies such as artificial intelligence (AI), blockchain, and technology-supported processes such as DevOps (a combination of software development and operations), low code/no code platforms that require little or no coding knowledge and cloud computing.
These investments help financial institutions to modernize legacy systems, enhance cyber security, prevent customer fraud, personalize customer experience and engagement, and improve product agility, the study explained.
“In order to best utilize emerging technologies and handle the exponential growth of data, financial institutions are moving applications to the cloud,” relayed the report. North American banking institutions are prioritizing moving domestic core banking much more so than those in other regions. “They also have a stronger belief that a multi-cloud strategy will become a regulatory pre-requisite.”
Product Agility/Embedded Finance and More
Product agility and enabling embedded finance are bigger strategic priorities in the next five years for North American financial institutions compared to other regions, according to the Economist Impact/Temenos study. Almost a quarter of financial institutions in North America (24%) compared to 18% globally are focusing technology investment on agile technology delivery. Accordingly, they are investing more on agile technology delivery (DevOps) and blockchain technology.
About half (47%) expect tech and e-commerce players, such as Google, Facebook, and Microsoft, to gain the most market share in investments, compared to 36% of financial institutions in Europe. To compete with non-traditional players, North American financial institutions prioritizing improving personalized and embedded customer experience and engagement more so than financial institutions in other regions (34% in North America vs. 27% in Europe and 24% in the Middle East and Africa).
North American financial institutions also are investing in blockchain as a fraud and cybersecurity tool, as well as to simplify processes and reduce costs. Compared to 12% of financial institutions globally, 17% of North American financial institutions focus their technology investment in blockchain.
To best utilize emerging technologies and handle the exponential growth of data, financial institutions are moving applications to the cloud. Thirty-six percent of North American financial institutions now prioritize moving domestic core banking versus 26% of financial institutions globally. More North American financial institutions (79%) believe that a multi-cloud strategy will become a regulatory pre-requisite in the next five years, compared to just 60% in Europe.
Other Findings
North American financial institutions in trying to figure out how to face growing competition:
· Are participating in sandboxes with fintech and other technology providers to test new propositions, more than financial institutions in other regions (40% vs. 32% globally).
· Are turning to digital technologies to modernize and secure their core infrastructure and processes as they compete with non-traditional players.
· See AI as a valuable tool for customer fraud detection more than any other region: 20% versus 11% in Europe and 13% globally.