IBM study uncovers tech challenges hampering financial institutions


A study led by IBM Institute for Business Value (IBV) has shed light on the discrepancies between the priorities of bank executives and their consumers.

Despite over 70% of banking executives viewing embedded finance as integral to their strategy, a mere 20% of them currently deliver embedded finance solutions.

There’s a significant preference among consumers for traditional banking, with 80% choosing to deposit their earnings and maintain savings in such institutions.

16% of global respondents show readiness to fully adopt digital, branchless banking experiences. Younger consumers demand more from their banks: 79% desire insights on better savings strategies, and 75% are open to investment guidance.

Bank executives overvalue the significance of peer-to-peer payments and BNPL when compared to what consumers value more: a satisfactory customer experience, mobile wallet features, and rewards.

Embedded finance is poised to revolutionise customer experiences by seamlessly incorporating financial products and services into non-financial service enterprises.

An increasing pressure on banks is arising from non-traditional competitors, like major techfins, which are setting new customer service standards.

Advocates stress the need for a modern hybrid cloud architecture in banking to facilitate the easy access and utilisation of data across organisations.

Existing gaps in technology infrastructure, the absence of API standards, and a disproportionate focus on privacy and security are holding back the potential of transformative technologies, such as generative AI in embedded finance platforms.

Zodia Custody CEO Julian Sawyer said, “Banks are facing a double whammy of challenges with pressure coming from non-traditional competitors such as the big techfins that have set new standards for customer expectations and are eager to deepen those relationships and from regulators pushing for open banking standards to level the playing field and drive more competition.”

Hans Tesselaar, Executive Director, BIAN said, “It has never been more critical for banks to focus on how financial institutions can increase their competitive edge and improve the experience they provide their customers. The findings from the research show just how much work banks have to do before they can achieve this.”

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