Payment tech has become an ‘arms race’ for banks
A new report from Marqeta characterises the post-COVID-19 banking environment to be an ‘arms race’, one that few organisations are fully prepared for.
These findings and more form a continuation of Marqeta’s ongoing research into how the pandemic has altered the sector’s priorities (read more on part one here).
Surveying 200 European banking executives, the company found an overwhelming majority (94%) agreed that more advanced technology would enable greater competitive advantages, as well as a broadened range of choices and better flexibility for customers.
However 84% believe that legacy infrastructure is stifling innovation, particularly at a time when pressures such as industry scrutiny and customer need are already at unprecedented levels.
Although the ongoing contest between incumbents and challenger banks has yet to produce a clear victor, there is some evidence to suggest that the only barrier preventing the latter from usurping the former is proof of longevity.
The superiority of digital banks’ customer experience and technology has been attested by The Economist Intelligence Unit; trust remains the ace up traditional banking’s sleeve, but it won’t last forever. To stay ahead, the industry will need to embrace wholesale digital transformation.
“The likes of Uber, Amazon, and Deliveroo, have set the bar when it comes to expectations around payments; having a slick and convenient way to pay has become a fundamental part of the customer experience,” said Ian Johnson, Managing Director Europe at Marqeta.
“Banks seem to be vying with each other to rapidly develop and launch new payments experiences to stay relevant and gain an advantage over rivals.”
Keeping up with digital
It should also be noted that the impediment of legacy technology is not a disadvantage shared by digital native banks, which make full use of cloud computing to keep their operations lean and agile.
Delaying the transition from legacy to digital can create a host of problems, including poor integration between old and new technology (62% of Marqeta’s survey reported this), incohesive or siloed payment platforms (55%) and lack of ability to customise (46%).
Despite this a slim majority (58%) state that they are uncomfortable or unwilling to break from the status quo, even though industry consensus seems to coalesce on the wisdom of such a move.
For some this originates from negative experiences with past implementations of new technology (44%), yet Johnson emphasises that they must overcome this aversion:
“Banks must break free from the shackles of legacy technology and embrace more agile systems built for the digital era. By harnessing technologies such as modern core banking and payment platforms, banks can innovate at the pace required to deliver new payments experiences to the market.”