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Covid-19 forcing the pace on strategic change in banking, finance

By Robin Amlot

October 14, 2020

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Covid-19 has had a significant impact on almost all (96%) European banks, with over three-quarters (78%) planning to change their future banking strategy to adapt to changes in consumer behaviour, such as the accelerated adoption of digital banking services and cashless payments.

Growing demand for digital services has resulted in 80% of Europe’s banks accelerating their plans to digitally transform. The banks also predict that digital transformation projects will need to be delivered in two-thirds (69%) of the time, with 89% saying that the pandemic has drastically increased the speed of change in banking from years to months.

These are among the key findings of the Marqeta COVID-19 European Banking Survey. “The future of banking has come around quicker than most expected. The onset of Covid-19 accelerated many trends in consumer behaviour, with more people moving away from cash and adopting digital services such as online and mobile banking,” said Ian Johnson, Managing Director Europe at Marqeta. “These are all trends that were set to slowly change over time and banks would gradually transform to adapt. But Covid-19 has drastically moved up the timescales, with 36% of banks saying Covid-19 has “opened up the floodgates” to modernising core banking and payment systems. Attitudes to modernisation have clearly changed. Banks are now speeding up efforts to transform because they know that the winners of the next age of banking will be determined by who can best adjust their strategy to adapt to the new normal.”

However, concern that the finance and insurance industries are failing to maintain data backups, visibility and scalability in their digital transformation ambitions and journey to the cloud are highlighted in the Veritas 2020 Data Management in a Multi-Cloud World: Finance and Insurance report. The report reveals that cloud adoption is experiencing strong growth, with almost half (48%) of organisational data stored or managed in the public cloud. IT decision makers in finance and insurance expect this figure to rise to 78% in just five years’ time.

“…the need for hybrid- and multi-cloud technology is tempered by fear of what might happen if something goes wrong,” said Ian Wood, Senior Director and Head of Technology at Veritas Technologies. “Arguably, these fears are holding these institutions back from technical advantage that could see them matching and exceeding the abilities of their younger and more agile competitors.”

The future profitability and even survival of institutions may leave them no choice but to take the leap forward. “Covid-19 has ushered in a new age of digital banking. Banks need to ensure they are prepared to adapt for this world, and many are set to double down on digital services and capabilities. But to do this, they need to overhaul legacy technologies that don’t provide the agility required to respond to the needs of the market. To adapt and thrive, traditional banks need to be supported with modern core banking and payment platforms that can support the requirement to digitally transform and provide the flexibility needed for their future banking strategies,” said Marqeta’s Johnson.

The Veritas report highlights that security fears are the most likely barrier to embracing the cloud, with 84% of IT leaders citing them as a concern when adopting public cloud technology. Stringent regulatory requirements are another major barrier. Over half (52%) of respondents indicate that the risk of non-compliance is one of their biggest challenges around cloud adoption.

However, Marqeta reports that more than three quarters (76%) of banks say that the impact of Covid-19 has meant that the business models they used to follow have changed forever. As a result of the pandemic, 92% of banks say that innovation has become more important than ever. When it comes to innovation, banks say they need to:

  • Improve their use of data analytics to gain insights into customers that will allow them to make lending decisions in real-time (91%)
  • Improve their technology capabilities to better use contextual data to make judgements on fraud as transactions are being processed (91%)

As part of their future banking strategy, more than half (54%) plan to reduce their physical branch network. Banks are also set to increase the number of digital services offered in branch (72%), the provision of specialist payment services (68%), their investment in digital banking and services (66%) and their digital innovation capabilities (61%).

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