The Catalysts Driving the Smart Finance Evolution.

Core banking continues to rank among the top technology investment concerns in banks. However, there is a fundamental mismatch between expectations based on real-time consumer experiences and a bank’s ability to serve those experiences front to back.

 There is no shortage of effort by banks to broach this gap and shore up the end-to-end consumer experience with emerging technologies, but the realisation that core banking infrastructure may not be up to the task is a bitter and expensive pill to swallow. Especially for the more traditional, legacy institutions.

While this is nothing new, pressures brought about by Covid-19 have served to exacerbate structural weaknesses as banks have scrambled to deliver and outperform in a purely digital manner. The cost of expediting these projects is substantial, to say the least, yet when presented with few other options, banks overwhelmingly accept as they appreciate the speed at which digital newcomers will happily step into their shoes.

The realisation that investment in resilient, powerful core banking systems will improve banks long into the future certainly softens the financial blow. Greenfield banks, for instance, are curating the architecture they are investing in now to ensure that they remain in step with the pace of change 10 to 15 years down the line.

The ease with which these digital banks are operating and expanding across diverse markets also informs how more traditional players can approach banking into the future. Yet, even the most sophisticated technology requires smooth implementation in order to profit from its offering – this means nurturing and honing DevOps agility is equally fundamental to both resilient core banking infrastructure and client satisfaction.

These opportunities present institutions with the proposition: replatform, refactor, augment or replace. The age-old dilemma is no longer painted with a brush of scepticism as banks increasingly see the value in collaborating with third parties to increase their product offering and view modularised systems as a keystone for ongoing innovation.

To deliver the full potential of this technology, the way core banking interacts with data remains an ongoing concern for banks which are being pulled in opposing directions by the need to both innovate and remain compliant.

This challenge weighs on latent revenue streams and institutions are carefully considering whether monetising data resources can be achieved without compromising customer rights and privacy regulations. Optimistically, however, banks are entrenching already established sustainability strategies with data-focused technology to deliver more ambitious carbon reduction objectives.

Engaging with leading financial institutions across the globe, this report grapples with the subjects that are front of mind for banks of all shapes and sizes as they face the unprecedented pressure of a pandemic coupled with meeting the breakneck pace of financial technology advancement.

This report by Finextra, in association with Red Hat and Temenos, explores the limitless opportunities firms hold to enhance and build upon their core banking infrastructure and gathers the views of several experts from Alba Bank, BBVA, CaixaBank, Commerzbank, Crown Agents Bank, ING, Investec, OpenBank, Sberbank, Société Générale, Standard Chartered, and Varo Bank.

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