A survey by the Economist Intelligence Unit found that most retail banks and financial institutions needed improvements to their core banking infrastructure just to cope with recent shifts in consumer finance markets. This means that, for most consumer banks, the adoption of a better core banking system is now a requisite for survival in the current retail finance landscape.
Here are 3 ways banks should adapt given current trends in digital core banking.
1. Harness Big Data to Address Entire Customer Journeys
The 2020s have brought momentous changes to retail banks and other financial institutions that target the wider consumer market. The COVID-19 pandemic had brought about an unprecedented worldwide acceleration of digital adoption.
While retail banks should have benefited much from this trend, the gains were largely in favor of new fintech companies, thanks to their better organizational agility and more customer-centric approach. Additionally, the human and tech components of older core banking systems were often unable to provide consumer banks the transparency, flexibility, scale, and agility needed to capitalize on the available consumer finance opportunities.
Partly as a reaction to this fintech challenge, new generations of core banking systems are designed from the ground up to empower retail banks to deliver highly refined and personalized customer experiences at a larger scale. The artificial intelligence and machine learning capabilities of new digital core banking solutions now allow financial institutions to effectively harness ever-growing volumes of data related to customer behaviors and general market trends. Additionally, smart automation features provide a speedy and seamless experience for customers during transactions, allowing for true real-time banking that also complies with all relevant banking standards.
This essentially means that, when implemented correctly and with the right goals in mind, retail banks can now directly compete with fintech and card provider businesses in terms of delivering better customer service.
2. Create Banking Architecture That Permits Total Interoperability
Better interoperability in financial organizations provides much-needed flexibility. As the COVID-19 pandemic showed, the inability to pivot at short notice proved to be a major weakness for many retail banks, causing them to not benefit as much from the incoming wave of consumer digitization.
One issue that prevented retail banks and other financial institutions from pivoting quickly is excessive data siloing across different business units. This phenomenon is often caused by different business units operating subsystems that are either not fully compatible or not properly set up to transfer data without manual inputs or ad hoc workarounds.
Current digital core banking solutions bring retail banks closer to the goal of true organizational interconnectivity. When paired with the right approach, new software can permit a level of seamless interoperability that was simply not possible a decade ago. Data in different business units can be automatically delivered to whichever parties need it, reducing the need for error-prone manual data inputs and cumbersome data silos.
To further improve interoperability, newer systems are designed to work securely with thousands of third-party or self-developed applications. This allows banks to maintain interdepartmental cohesiveness in data management regardless of any new localization or unit-specific updates.
3. Set Foundations for Continuous Improvement and Innovation
Banks are under immense pressure to be more adaptable than they’ve ever been. In some ways, this demand for flexibility seems antithetical to the traditional goals of banks, which was to provide continuity and stability.
Thankfully, the artificial intelligence and machine learning capabilities of new core banking systems have given banks a way to create innovation without sacrificing their role as stable financial platforms.
With better artificial intelligence and machine learning modules, modern digital core banking solutions offer a way to accurately assess individual customer and market risks to greater degrees than ever before.
What this essentially means is that, with better systems, banks are freer to develop new products and improvements. What’s more, they can develop these innovations faster and with much more accurate feedback than was possible with older core banking systems.
Ramp Up Your Retail Bank’s Competitiveness through an Updated Core Banking System
Retail banks today face serious competition from card providers, fintech startups, and emerging alternative finance services. Though previous generations of core banking systems may be viable for the next few years, many of these older solutions are now unable to give retail banks the agility, transparency, and cost savings offered by today’s current software. Additionally, older core banking solutions are now proving to be a hindrance when it comes to addressing core customer service issues.
The artificial intelligence and machine learning capabilities on newer systems are proving to be a game-changer for retail banks that have already adopted them. They are now enabling retail banks to effectively address entire customer journeys and are laying the groundwork for continuous banking innovations. To sum up, these tools are giving retail banks the capabilities they need to compete in an increasingly competitive retail finance environment.
If you’re interested in updating your core banking system, it will be important to make the transition with a clear-cut understanding of what your institution needs. Make sure to choose a reputable vendor that understands your bank’s goals and can offer training and technical support throughout the lifetime of the new system.
