This paper argues that the widespread uptake of disruptive new technologies is exacerbating the pressures facing retail banking today, thereby driving a fundamental change in the structure of the industry i.e. digital-driven disintermediation of the banking value chain.
Most European banks are not equipped for this change because of the limitations of their aging legacy systems. Although banks have been investing in digital propositions in the frontend, they have been reluctant to embark on core systems replacement.
At Temenos, we believe that true digital transformation requires developing a coherent front-to-back proposition, built on a future-proof, modern core banking platform rather than on a complex web of legacy applications. Without a modern core, it is not possible to fulfill the emerging needs of the industry and to meet the heavy regulatory burden in an affordable way. The good news is that core banking transformations can now be executed easily and with acceptable levels of risk, because of the sophistication of packaged software now available and the lessons learnt and proven benefits delivered from successful transformations all over the world.
The technology mega-trends in retail banking
Today, a nexus of four disruptive technologies – mobile, cloud, big data and social media - is becoming omnipresent in retail banking. Blockchain, the distributed transaction validation model behind digital currencies, is another technology likely to significantly impact banking, especially payments, in the future.
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Digital innovation built on batch systems with inflexible product engines, hard-wired channels and broken, manual processes, is not sustainable. A modern, digital front-end without a modern core banking platform will eventually hurt a bank, for it will be unable to provide customers the full front-to-back service that they have come to expect from the likes of Amazon and Uber.
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