London – 29 March 2012 – There is a growing polarisation between innovative banks replacing their core infrastructures to remain profitable and pursuing growth, and those who are not.
This is according to an IDC Financial Insights White Paper, sponsored by Temenos, ‘Renovate to Innovate: The Time Is Now for European Retail Banking’ (IDCWP45T, March 2012). The White Paper focuses on the impact that new market dynamics will have on retail banks’ ability to retain today’s demanding customers, stave off competition from new market entrants, and increase profitability.
The White Paper finds that European retail banks need to dramatically review and update their business models and supporting IT infrastructures to remain profitable – and crucially, to grow – in the face of new regulations, such as Basel III, and heightened competition from new entrants. Core banking system renovation is essential to support innovation at the front-end for banks, allowing them to offer the most comprehensive, customer-oriented services, and bring new channels and products to market much faster. The IDC Financial Insights White Paper sponsored by Temenos also finds that 75 per cent of the fastest growing retail banks have replaced their legacy architecture.
Rachel Hunt, EMEA research director for banking, at IDC Financial Insights, commented:
Banks are embracing the customer experience debate like never before, with customer service becoming the new differentiator in an industry still mostly built around product and pricing strategies. IT should be the enabler of change, but for too many mid-tier retail banks, the systems and infrastructure, as well as the resources, have remained fixed in the past.
Adrian Hadley, retail banking product director, Temenos, said:
Those retail banks who complete core system renovation early will reap benefits from their ability to innovate. It will more than offset the cost of updating or replacing their legacy systems. The gap between innovators and laggards will grow in the next five years, with many paying the price of waiting.
Rather than supporting retail banks’ product innovation and growth strategy, legacy core systems are in fact strangling them. Inflexible system architecture is diminishing the service which banks can provide, and in an age where customer loyalty is dead, banks need the agility to bring new products to market at lightning speed – ahead of the competition. A truly innovative bank not only caters to the needs of its customers, but guides their future demands, shaping the future of banking. Core system transformation is at the top of the agenda of banks with ambitious growth and profitability plans.