New Study by IBM Reveals Disconnect Between Banking Executives and Customers
A recent study conducted by the IBM Institute for Business Value, in partnership with the Banking Industry Architecture Network and Red Hat, has shed light on the significant gaps between the priorities of banking executives and the needs of their customers. The study, titled “Embedded Finance: Creating the Everywhere, Everyday Bank”, explores how customers interact with the digital world and how banks are investing in embedded finance to integrate themselves into the financial journeys of consumers.
The research involved over 1,000 banking industry leaders and more than 12,000 consumers across five continents. Surprisingly, more than 70% of the surveyed executives acknowledged that embedded finance is either a core or complementary part of their business strategies. However, only 20% currently offer embedded finance solutions.
According to Shanker Ramamurthy, the global managing partner banking and financial markets at IBM Consulting, traditional banks are facing a “double whammy” of challenges. They are being pressured by non-traditional competitors, such as large technology companies that have set new standards for customer expectations, and regulators who are advocating for open banking standards to foster competition. Ramamurthy emphasized the importance of modernizing technology infrastructure, adopting a hybrid cloud architecture, leveraging emerging technologies like generative AI, and collaborating with partners to create a successful banking strategy.
The study also found that while 80% of consumers still prefer to deposit their salary and savings in traditional banks, 16% are already comfortable embracing fully digital experiences offered by branchless institutions. Many consumers are seeking higher levels of engagement from their financial institutions, with 79% of younger respondents open to receiving insights on better ways to save and 75% open to guidance on investing.
Security was identified as the top priority by both banking leaders and consumers. However, banking leaders overestimated the importance of peer-to-peer payments and buy now pay later services, compared to consumers who prioritize good customer experience. Younger respondents specifically highlighted good customer experience as their second-highest preference, followed by mobile wallet functionality and rewards.
Based on the findings of the study, there are several barriers hindering progress in realizing the business opportunities associated with embedded finance platforms. These include outdated technology infrastructure, a lack of application programming interface standards, and insufficient resources devoted to privacy and security. Overcoming these challenges is crucial to fully harnessing the potential of exponential technologies, such as Generative AI, in the banking industry.
In conclusion, the study conducted by IBM highlights the urgent need for banking executives to align their priorities with the evolving needs and expectations of their customers. Embracing embedded finance solutions and investing in the modernization of technology infrastructure will be essential for banks to stay competitive in the digital era.
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