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APAC banks need to embrace digitization or lose market share — report

The new report by The Financial Times Focus and Mambu shows that banks must reposition themselves and embrace technology to avoid “extinction.” The results of the report illustrate the urgent need for banks to modernize their offerings, with 58% of global respondents predicting they will completely cease to exist in the next five to ten years unless they change their business models.

The “Evolve or be extinct” report reveals that two in three (67%) banks believe they will lose market share within two years if they fail to digitally transform.

Cloud banking platform Mambu and The Financial Times Focus (FT Focus) surveyed over 500 senior banking executives globally to gain insights into their perception of the banking industry, now and in the future.

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“The last 18 months have shown banks just how important it is for them to have a robust and agile digital banking offering,” said Elliott Limb, chief customer officer, Mambu. “And with 53% of those surveyed admitting they’re at risk of missing digital transformation targets, it’s time the industry took note of the financial ‘evolvers’ that are leading the charge in this space. These are fintechs, challenger banks, and forward-thinking traditional players that are prioritizing purpose-driven services and great customer experience.”

Big data, ML, blockchain

In terms of geography, the report found that Asia Pacific (APAC) is lagging behind other regions in terms of digital transformation. Aware of this, banks plan to increase investments in different areas of technology including big data, machine learning, and blockchain.

“While the strong commitment from APAC banks to increase their investment in new technologies is very positive, banks in the region also need to change the way they approach innovation and start proactively embracing new partnerships and collaborations,” said Myles Bertrand, managing director, Mambu, APAC. The ‘ecosystem’ approach has been incredibly successful in other regions, and with half of APAC banks concerned that they lack key internal workforce skills necessary to transform, it will prove very effective here too.”

Globally, 40% of respondents said they intend to modernize to a platform-based offering post-pandemic, working with third-party providers to develop plug-and-play banking services run on flexible, independent systems. Modernizing to a platform-based structure and investing in data capabilities are key factors that separate digitally advanced companies from the rest of the banks.

Digital strategy

The report also found that outdated perceptions of banking are slowing down progress at a time when ESG (environmental, social, and corporate governance) goals and the customer experience are set to be the key growth drivers of the future.

The survey also saw that 81% of retail banking leaders strongly agree that replacing outdated mindsets with a progressive social purpose is vital to growth strategy, with this statistic reflected in profit falling down the priority list for banks, with “increased revenues” ranked as only the fifth-biggest benefit of moving to a customer-centric banking model.

With nearly a quarter of banking leaders describing their digital strategy as either “nascent” or “exploratory,” the findings reflect the need for greater collaboration within the banking community, as well as the opportunities for forward-thinking players that embrace innovation through fintech ecosystems.