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Rebuilding for the Digital Age Banking Circle research has uncovered how financial institutions are rethinking the value of digital infrastructure to future-proof their business in a post-pandemic world. Anders la Cour, Co-Founder and CEO of the financial utility discusses how the crisis has accelerated digitalisation strategies across the industry.

Rebuilding for the Digital Age

Rebuilding for the Digital Age


Banking Circle research has uncovered how financial institutions are rethinking the value of digital infrastructure to future-proof their business in a post-pandemic world. Anders la Cour, Co-Founder and CEO of the financial utility discusses how the crisis has accelerated digitalisation strategies across the industry.


Earlier this year Banking Circle commissioned MagnaCarta Communications to take an in-depth look at capturing value in financial services for a digital age. The plan was to conduct research among the senior executives of banks, fintechs, payment service providers (PSPs) and payment intermediaries in Europe for their thoughts on the development of digital strategies. But then those plans changed.

We took the opportunity to shift the emphasis of the study slightly and to look at the expected impact of the newly confirmed pandemic and the resulting lockdowns imposed on the regions involved in the research. This provided us with a unique snapshot of business confidence, adaptability and future plans at that point in time.

Even before the global pandemic, banks had been changing their business practices, their culture and, most of all, their technology to create more responsive and flexible businesses that centre on customers’ requirements and experience. The MagnaCarta research looked at how attitudes towards digital technology have changed, particularly around the cloud and outsourced provision of commoditised banking services, such as payments. The potential impact of government stimulus policies and the relative strengths of banks against other players in the finance ecosystem were also examined.

Feedback from the survey and interviews showed industry-wide optimism for the future. A substantially different picture from a decade ago. (See fig. 1)

 

Fig 1: are you building technology design and architecture into your business planning

Fig 1: are you building technology design and architecture into your business planning?Source: MagnaCarta, Banking Circle Research 2020


Some key findings include:

  • 93% of respondents agree that customers value experience more than they value institutional stability
  • 90% are building technology design and architecture into their business planning
  • 80% of retail banks and 74% of commercial banks have already worked with infrastructure providers
  • Just 14% were unable to realise the efficiencies they set out to achieve from more flexible, outsourced infrastructure
  • Only 5% of retail banks are concerned about the threat of recession compared with 31% of fintechs and 41% of PSPs

Many may have looked forward to 2020 as the hopeful dawn of a new decade. Sadly, the reality has been very different. So far, 2020 has dealt us a cruel blow, presenting us with an unpredictable future, a rapidly changing landscape and horizons of change.

However, it is both exciting and encouraging to see how the value of digital has taken on a new and immediate significance during the crisis.


Regulation and customer expectations

Respondents to the industry survey and the individuals interviewed were asked to comment on the biggest challenges their business currently faces. The results may come as a surprise. (See fig. 2)

 

Fig 2: What IS in your opinion most challenging about banking in the current macro-environment

Fig 2: What IS in your opinion most challenging about banking in the current macro-environment?Source: MagnaCarta, Banking Circle Research 2020


When ranking their three biggest challenges, less than a third (28%) included economic recession – which was already widely accepted as an inevitable consequence of the pandemic, even at the early stage when we conducted the research. Surprisingly, recession came sixth in the list of top challenges.

According to our respondents, the more pressing challenges were aligned to a business-as-usual world. Almost two-thirds (58%) of senior banking executives in key European markets said the impact of regulation was one of their top three challenges. Just over half (53%) also considered the implications of constantly evolving expectations of customers as a top-three challenge.

Regulation and changeable customer expectations are certainly not new challenges, in fact these two issues could have topped any similar poll over the past 10 years.

 

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