Traditional banks continue to adopt modular, cloud-based architectures to meet customer demand for easy digital experiences, ISG Provider Lens™ report says, Banks still using legacy technologies are continuing to move toward modern digital platforms to better compete with emerging rivals, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
The 2023 ISG Provider Lens™ Digital Banking Technology and Platforms global report finds that traditional banks’ monolithic IT environments do not allow rapid innovation and are increasingly expensive to operate. At the same time, a range of new competitors are offering alternatives to traditional banking products, capturing the growing market of consumers who expect seamless, omnichannel digital experiences.
“Banks need to be where customers are,” said Owen Wheatley, ISG’s lead partner for banking and financial services. “With modern platforms, they can rapidly introduce convenient, digital products and easily add features to meet changing demands.”
Most banks that are modernizing are either carrying out progressive digital transformations one module at a time, implementing new platforms out of the box or launching new, greenfield operations separate from their traditional offerings, the report says. Because they need resilience and agility, banks are partnering with providers that offer cloud-based, modular, microservices-based architectures. The most effective systems use open APIs for easy interoperability with third-party features and are connected to a broad ecosystem of fintech startups for continuous co-innovation, ISG says.
A key benefit of modern banking platforms is real-time data processing, which allows banks to quickly onboard new customers, perform know-your-customer procedures and make time-sensitive decisions such as loan approvals, the report says. With real-time decision-making, banks can get into new businesses such as buy-now-pay-later services.
Changes to regional and global banking regulations are forcing banks to use new payment systems and more data-rich message formats, ISG says. Modern digital platforms help banks comply with these regulations and use the newly available data to offer customers more personalized products and services. New regulations also require stricter risk screening and fraud detection, further increasing the need for fast, flexible data processing.
“Banks are sharpening their focus on preventing financial crimes,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Modern banking platforms enable stronger protections that can be improved over time.”
The report also explores other banking technology trends, including the rise of DevOps practices and the growing need for real-time payment processing systems.
For more insights into global banking challenges, including the shortage of skills to manage legacy systems, and advice on how to overcome them, see the ISG Provider Lens™ Focal Points briefing here.
The 2023 ISG Provider Lens™ global Digital Banking Technology and Platforms report evaluates the capabilities of 38 providers across three quadrants: Core Banking Platforms, Digital Banking Engagement Platforms and Payment Processing Platforms.
The report names Finastra, Intellect Design and Temenos as Leaders in all three quadrants. It names Infosys Finacle, Oracle and TCS BaNCS as Leaders in two quadrants each. ACI Worldwide, Avaloq, Backbase, FIS, Fiserv, Jack Henry & Associates, Thought Machine and Volante Technologies are named as Leaders in one quadrant each.
In addition, Mambu and Q2 Software are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.
A customized version of the report is available from Comviva.
The 2023 ISG Provider Lens™ global Digital Banking Technology and Platforms report is available to subscribers or for one-time purchase on this webpage.
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