Transforming the Fundamental Digital Foundation in Banking Sector
In the rapidly evolving world of banking, a strategic shift towards a digital core is proving to be a game-changer for many institutions. According to consumer research, banks with high customer advocacy scores grow their revenue faster, fostering loyalty and organic growth.
This transformation is not without its challenges. A significant 21% of banking executives identify a misalignment of priorities between business and IT as a strong barrier. However, organizations that understand the dynamic forces at play are reinventing themselves, and it's working.
One such example is Gemini Bank, which successfully revamped its digital core optimized for generative AI. By enhancing credit risk assessment with machine learning, improving loan approval and early warning processes, and partnering with tech firms to deploy intelligent investment advisory and risk management systems, Gemini Bank has positioned itself for future success.
The digital core, defined as the critical technology capability that empowers an organization's unique reinvention ambitions, includes acceleration through cloud infrastructure and practices, data and AI for differentiation, applications and platforms for growth, next-gen experiences, and optimized operations with security by design.
73% of banking executives are accelerating innovation spending compared to the period from 2020 to 2022, with the majority (99%) reporting technology as the top lever for reinvention. Generative AI is seen as one of the main drivers, with 80% of banking executives planning to use it to reinvent their IT function. In fact, generative AI is already changing work for most employees at most banks, and this is just the beginning.
The main challenge for banks in adopting digital core technologies is making apps cloud-native and integrating cloud into work practices. To address this, most banking executives plan to allocate approximately 8% of their IT budgets to support new business capabilities.
However, none of the banks have been able to achieve maturity across all digital core components simultaneously, which is essential for a reinvention-ready digital core. To overcome this, Siam Commercial Bank (SCB) has taken a proactive approach, unlocking the value of its data to enhance consumer experiences, optimize operations, and fuel future growth.
The potential return on equity boost that can be achieved by banks is 3-8 points. Moreover, banks that embrace a payments reinvention strategy and invest to build a strong digital core can gain market share, unlocking a $55 billion opportunity.
As 42% of banking executives are actively engaged in implementing a transformation program, it's clear that the banking industry is embracing the need for change. By focusing on customer advocacy, innovation, and leveraging technology such as generative AI, banks can position themselves for growth and reinvention in the digital age.
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