Research by analytics leader SAS has found that the vast majority of banks underwent a rapid digital adoption process during the pandemic.
A mixture of UK challenger and traditional banks were surveyed during the research about how their IT infrastructure, processes and priorities had changed during the pandemic.
Up to 93% of traditional banks said they have accelerated their digital by five years during the pandemic, compared to 87% of challenger banks. Around 87% of respondents believe that traditional banks are now more competitive due to the drastic technological shift.
With their newfound competitivity considered, up to 84% of banks were now confident that traditional banks would press ahead with digital adoption. However, nine in ten respondents disagreed with the idea that this would mean challenger banks would now need to find a new platform from which to compete with traditional banks.
When it comes to how traditional and challengers will use the technology, two thirds – 65% – of challenger banks saw offering a more personalised service as a key point of differentiation compared to just 53% of traditional banks.
Up to 65% of challengers saw being data-driven as a competitive advantage, compared to only 33% of traditional banks. Despite the low interest in being data-driven, over half – 53% – of traditional banks recognised the use of AI and ML as areas where they can secure an edge, compared to only 39% of challenger banks. Meanwhile, 83% of all respondents agreed the investment in data analytics over the next three-to-five years would be ‘significant’.
Other findings from the study included up to 61% of banks citing security and compliance concerns as a key inhibitor to cloud adoption, while 87% of traditional banks calling out legacy system integration as the chief barrier. Up to 91% of challenger banks selected technology innovation as the most important factor when choosing applications to support the core banking system, followed by improved security and better data management. This was broadly similar for traditional banks, but improved security and better data management were ranked higher than tech innovation.
In addition, 63% of banks are now either fully or partially outsourcing their customer relationship processes to third parties, meanwhile, 84% are already doing the same for their AML processes.
SAS UK and Ireland head of banking Johnny Steele said, “While traditional and challenger banks have accelerated their adoption of technology rapidly during the pandemic, their priorities remain broadly the same. In essence, as things stand, they will be using the new technology to double down on their pre-existing competitive advantages.
“However, this is an opportunity for banks to innovate in a different way. Traditional banks, for example, can use their deep resources to provide a broad portfolio of services to their customers, as 13 per cent are already prioritising. At the same time, though, through cloud-based advanced analytics, traditional banks can ensure that these new services, and the ones they already have on offer, are deeply personalised and easy to use.
“This means being able to complete banking processes almost entirely online, without having to go in-branch or speak to someone on the phone. Increasingly, this is what customers demand from their bank. Therefore, whether it’s challenger or traditional banks, it’s crucial that they can offer a frictionless service which is also fairer and simpler for their customers.”
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