For banks undergoing a digital transformation, and banks that are about to embark on one, it can feel like a daunting, multi-year journey that is fraught with difficult decisions and a great deal of unknowns. A new survey of banking executives, jointly conducted by American Banker and Thought Machine, reveals how U.S. banks and credit unions are approaching digital transformation, what they are getting right and where there are opportunities for improvement
New Arizent Research for American Banker, conducted with Thought Machine, Demystifying Digital Transformation in Banking, finds that banks are embracing some common elements across digital transformation initiatives but are often missing two critical areas in their roadmap – cloud strategy and core modernization. In fact, just 56% of banking executives surveyed report having core banking modernization as part of their digital transformation strategy and fewer than half (44%) have a cloud migration plan. This report examines the digital transformation practices banks are embracing and the challenges they are facing as they seek to accelerate transformation and lead the next era of consumer finance. Among the key findings:
Banks most commonly focus on digital product development, operational efficiencies and AI/data analytics as core elements of their digital transformation strategies. To most successfully advance these goals, however, requires investment in critical infrastructure such as core banking platforms and the opportunity to tap into the flexibility and scalability of cloud to meet the demands of modern-day banking.
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Yet, just 4 out of 10 banks responding have started a core banking modernization journey. Among the majority who have not yet embarked on that journey, half are still in the planning phase and have not yet selected a vendor for that initiative. Concerns about integration with external systems and products top the list of challenges slowing those efforts.
While 8 in 10 banking leaders surveyed note their institution has a cloud strategy in place, less than half of those surveyed have a cloud strategy that pertains to both their core banking platform and product roadmap introducing potential roadblocks to long-term transformation.
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American Banker, an Arizent publication, conducted this survey to understand how banks are approaching the modernization of their core banking systems, including the progress toward adopting next-gen core systems, their propensity to choose cloud native core systems, and the challenges to modernization. The survey was conducted online during the second half of 2021 among 102 digital transformation stakeholders at banks and credit unions. About 25% of the respondents surveyed are from banks with more than $50 billion in assets, 35% have $10-$49 billion in assets and the remaining 40% have assets of less than $10 billion.
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