Banks chuck legacy vendors, startup love deepens

Gartner predicts that by the end of 2019, 25 percent of retail banks will use startup providers to replace legacy online and mobile banking systems

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BANGALORE, INDIA: Despite banks facing intense pressure to increase efficiencies and reduce costs while delivering next-generation digital services, legacy application vendors have been slow to respond to new requirements, according to a new report from Gartner.


New vendors are emerging to meet both customer and bank needs for channel integration and dynamic customer experiences that make banking easier to accomplish on the devices customers want to use. These vendors challenge the traditional — often incumbent — vendors of traditional online and mobile banking and core banking solutions.

Gartner predicts that by the end of 2019, 25 percent of retail banks will use startup providers to replace legacy online and mobile banking systems, as the emerging providers of digital banking platforms offer banks interesting opportunities for innovation.

“However, CIOs must prepare to manage the challenges of evaluating and selecting new vendors that may not have proven track records in the financial services vertical or may simply be new and untried without an extensive customer base. It can be difficult for CIOs to justify investment in their solutions to their boards and regulatory agencies, but don’t use that as a reason to exclude new vendors,” said Stessa Cohen, research director at Gartner.


Legacy Vendors Slow to React

The market for digital banking platforms is highly fragmented. Vendors include:

·         Incumbent bank niche vendors

·         Mobile or online banking solution vendors

·         Horizontal digital platform and customer experience vendors

·         Horizontal portal vendors

·         System integrators

·         Emerging digital banking vendors

·         Startup digital banking vendors

One of the most important reasons the market for digital banking solutions has opened up is that most c that offer bank channel applications — for both consumer and business customers — have been slow to react to new customer requirements.

Incumbent vendors offer traditional online and mobile banking solutions and integration with core banking systems, but often do not support open architectures that decouple the presentation of services from the services and transactions themselves and, crucially, enable the bank to bring new and existing processes together to offer innovative digital services.

“This is why many banks developing digital banking strategies to meet customer demands have sought out new providers to replace their existing online and mobile banking solutions with digital banking platforms,” said Cohen.