APAC banks lagging behind in digital transformation

New report by The Financial Times Focus and Mambu shows banks must reposition themselves and embrace technology to avoid extinction

• One third of APAC banks are concerned that their legacy platforms are holding them back
• Three in five APAC banks believe they will cease to exist in 5-10 years unless they change their business models

SINGAPORE | SYDNEY, 16 September 2021 – Two in three (67%) banks believe they will lose market share within two years if they fail to digitally transform, according to a new report from cloud banking platform Mambu and The Financial Times Focus (FT Focus).

The ‘Evolve or be extinct’ report was conducted by FT Focus and surveyed over 500 senior banking executives globally to gain insights into their perception of the banking industry, now and in the future.

The results illustrate the urgent need for banks to modernise 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.

Looking more closely at Asia Pacific, the FT Focus report indicates that the region is lagging behind other regions on transformation, however, APAC banks are taking steps to ‘catch up’ to the rest of the world, with plans to increase investment in big data, machine learning and blockchain at significantly higher rates than other regions.

Myles Bertrand, Mambu’s Managing Director APAC, said: “The research illustrates how the banking industry is diverging on its approach to digital transformation. While less than one third of APAC banks describe their digital transformation strategy as mature or advanced, there’s an emerging cohort of digital ‘evolvers’ that is bucking this trend and really leading the way. What we’re seeing is these forward-thinking players helping those lagging behind to level up their transformation efforts, setting a blueprint for the rest of the industry to follow while demonstrating the business case for a customer-centric approach.

“And 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. 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.”

Kristofer Rogers, General Manager ANZ at Mambu, added: “Digital transformation can’t be viewed as a long-game anymore, and in fact three in five APAC banks believe they will cease to exist within the next five to ten years if they don’t change the way they operate. That’s a very sobering statistic. And a third of banks are concerned that their legacy technology platforms are holding them back, so there’s still a lot of work to be done. On a positive note, 72% of banks in the region said that their speed-to-market has increased over the past 12 months, so there’s clearly an understanding of the need for speed when it comes to digital transformation… now banks just need to get the execution right.”

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

But while these forward-thinking players can see the benefits of digital transformation, outdated perceptions of banking are slowing down progress at a time when ESG goals and the customer experience are set to be the key growth drivers of the future.

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.

Elliott Limb, Chief Customer Officer at Mambu, said: “The last 18 months have shown banks just how important it is for them to have a robust and agile digital banking offering. 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 prioritising purpose-driven services and great customer experience.”

The report also highlights the slow progress and challenges banks are facing as they move away from traditional and legacy banking services towards digital.

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.

Download the global Evolve or be Extinct report.

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About Mambu

Mambu is the world’s only true SaaS cloud banking platform. Launched in 2011, Mambu fast-tracks the design and build of nearly any type of financial offering for banks of all sizes, lenders, fintechs, retailers, telcos and more. Our unique composable approach means that independent components, systems and connectors can be assembled in any configuration to meet business needs and end user demands. Mambu has 700 employees​ that support 200 customers in over 65 countries - including N26, OakNorth, Tandem, ABN AMRO, Bank Islam and Orange Bank. www.mambu.com