Most banks envisage losing 'significant' market share if they fail to digitise customer-facing processes, new study finds

According to a survey of 114 people working for 104 banks and payment organisations across 29 countries, 54% of respondents agree or strongly agree that they will lose market share year-on-year to digital-only new entrants to the market and "have no business left in three years time" if they do not digitise their "client facing processes". A further 27% of respondents slightly agreed with that opinion.

The results of the survey have been outlined in a new report by Finextra Research and Connective, a digital transaction management reference company. Respondents to the survey included chief executives, chief information officers, heads of digital banking and innovation managers.

Many of the survey participants identified issues with legacy IT. More than two-thirds (68%) said the core systems in place at their organisation "are too rigid and slow to support internal business users", according to the report. However, almost a quarter of respondents said they did not agree or strongly disagreed with that view.

Nearly half of respondents (45%) also said they believe a "full overhaul of … IT infrastructure" is necessary to digitise their bank or insurance firm.

"The survey demonstrates the problem that traditional banks face when competing with digital-only new entrants," technology law expert Tim Roughton of Pinsent Masons, the law firm behind Out-Law.com, said. "It is difficult for banks with legacy IT infrastructure and embedded processes to react quickly enough to their more dynamic, agile competitors."

Becoming "more client centric" is the number one strategic driver for digitisation in banking, according to the survey. Organisational flexibility and operational efficiency and cost cutting are the next most popular reasons why banks are looking to digitise, it said. 

Most respondents (66%) said they believe bank and insurance customers "want to have the same insight (view) and access to data" as the companies themselves. It is necessary for banks to create "digital interfaces" to enable this, and to provide a simple user experience, Finextra Research and Connective said.

They said: "Financial institutions need to create digital interfaces that provide common functionality within just a few clicks, while also intelligently adjusting functionality to customer behaviour and preferences and transparently presenting back to the customer useful insights based on their own data."

"A trap that many financial institutions have fallen into in the past is to approach digitisation from the starting point of their existing internal systems and processes. This results in user experiences where transaction journeys are unclear and require more thought, time and clicks than necessary," they said.