Exploring the Digital Frontier: Australian Banks' Unavoidable Path to TransformationBy Mekayl Mashhadi Ahmed, Global Marketing Manager at NETSOL Technologies Inc. on 09-08-2023
The banking sector is undergoing extraordinary disruption due to digitization and technological innovation, with the pace of transformation accelerating and continuing to gain unparalleled momentum. Faced with evolving customer expectations, the need to substantially reduce costs and shifts in regulations, banks are confronted with pivotal choices as they navigate through this changing landscape.
In an era marked by unprecedented technological progress, the financial landscape is undergoing a remarkable evolution, and Australian banks find themselves standing at the precipice of this digital frontier. The relentless march of technology is reshaping customer expectations and altering industry dynamics. Digital transformation in banking is an essential pathway toward remaining competitive, responsive and relevant in today's rapidly evolving financial landscape.
In recent years, substantial digital overhauls have been initiated by Australian banks and financial services firms. Major entities have noted a surge of over 50% in app utilization during the pandemic. Nevertheless, insights from the global health crisis period indicate that over 80% of financial services leaders feel it is imperative to enhance their organization's IT infrastructure and applications to enhance adaptability to external shifts. These findings are drawn from a 2022 report by the Economist Intelligence Unit and Appian.
"The top Australian lenders are locked in a technology investment arms race," said Theo Efthymiou, Partner, Financial Services, at KPMG. "Almost everyone has a multiyear technology transformation project in play. But unfortunately, very few institutions are able to achieve the return on investment they would have expected at the outset, or show value along the journey."
Global banking benchmark study 2022: Key findings
The Global Banking Benchmark Study 2022 by Publicis Sapient unveiled that nearly 60% of Australian banks had not yet initiated the implementation of their digital transformation strategies. This situation persists even after the pandemic accelerated the adoption of remote operations and digital customer engagements. The study's insights are derived from a survey encompassing over 1000 senior executives from banks in 13 international markets, including Australia.
As banks endeavor to steer towards enhanced customer experiences and maintain competitiveness, their progress is being impeded by operational obstacles, regulatory complexities, outdated technologies and shortages in required skills. These factors collectively hinder the pace of momentum. Nonetheless, the survey's finding identified that Australian banks exhibit resilience in the face of these challenges. Many banks are formulating audacious goals for digital transformation, encompassing initiatives such as embracing novel technologies, optimizing data utilization and fostering a culture of experimentation and adaptability. These measures are aimed at enabling them to swiftly scale their operations.
As banks endeavor to steer towards enhanced customer experiences and maintain competitiveness, their progress is being impeded by operational obstacles, regulatory complexities, outdated technologies and shortages in required skills.
Banks are additionally introducing new product and service offerings, while also initiating measures to transition from being product-oriented entities to those that place a stronger emphasis on customer-centric approaches. This is imperative as enhancing the customer experience emerged as the foremost digital transformation objective for Australian banks. Furthermore, nearly half of the participants (48%) underscored the importance of modernizing their operations through the adoption of cloud-based core banking systems, ranking it as a top priority.
Concurrently, 38% indicated their efforts to integrate customer data from various systems as a strategy to enhance customer experiences. Notably pragmatic, banks demonstrated their aspirations, as nearly 70% of participants emphasized the necessity for swift and substantial changes instead of gradual advancements to effectively attain their future digital transformation goals. Australian banks have unmistakably conveyed that their foremost focus over the upcoming three years lies in investing in core banking systems based on the cloud, aiming to propel operational transformation.
This, when combined with moving away from legacy systems and moving to modern technology platforms, alongside the provision of personalized services and the realization of a seamless Omni-channel experience, will undoubtedly enhance their holistic banking propositions for the future.
Australian banks have unmistakably conveyed that their foremost focus over the upcoming three years lies in investing in core banking systems based on the cloud, aiming to propel operational transformation.
Tech-savvy Aussie customers reiterate essence of customer-centric approaches
As assessed via findings from the study above, banks have been placing a strong emphasis on customer-centric approaches. The emergence of digital technologies has transformed customer expectations, demanding seamless, convenient and personalized banking experiences. Australian banks have recognized this shift and have embarked on digital transformation initiatives to meet the evolving needs of their customers. This transformation involves leveraging technologies, including but not limited to, mobile banking apps, online platforms and artificial intelligence (AI) to deliver innovative financial services.
The emergence of digital technologies has transformed customer expectations, demanding seamless, convenient and personalized banking experiences.
Digital transformation in banking and for the Australian financial services industry as a whole enables enhanced customer experiences. Customers have a preference towards facilitating their banking transactions from the comfort of their homes using mobile banking apps, which offer features such as balance inquiries, fund transfers and bill payments. Moreover, banks implement AI-powered chatbots to provide instant customer support, making banking interactions more efficient.
These advancements have not only improved customer satisfaction, but have also increased operational efficiency for banks. Essentially, digitalization in banking substantially reduces costs, alongside improving operational efficiency.
According to the Australian Banking Association, currently around 80% of Australians prefer to transact online. A recent report from June this year found that mobile wallet transactions skyrocketed to $93 billion, as a whopping 98.9% of bank interactions take place digitally (via apps or online) in the country. Further, the report found that cash was being used for just 13% of payments.
It is pertinent to note that between 2019 and 2022 there was an increase of 21% in online banking interactions, a 31% increase in app interactions and a 46% decline in branch interactions. Aussies are highly inclined towards innovative digital banking solutions.
"Australia has witnessed a phenomenal shift in customer banking and payment preferences in recent years," stated Australian Banking Association Chief Executive Officer Anna Bligh. "As a nation, we are early adopters of new payment options. Globally, Australians are now at the forefront of adopting cashless payment methods and it's clear these recent technology leaps are now permanent consumer preferences." Essentially, Australia has emerged at the forefront of digital payments - it is now essential that banks in the country embrace this.
Australia has witnessed a phenomenal shift in customer banking and payment preferences. As a nation, we are early adopters of new payment options. Globally, Australians are now at the forefront of adopting cashless payment methods and these recent technology leaps are now permanent consumer preferences. - Australian Banking Association Chief Executive Officer Anna Bligh.
Moving away from obsolete legacy systems
In Deloitte's report 'Modernizing Legacy Systems in Banking', it was stated that existing core banking systems and applications, having endured years of inadequate investment, remain unoptimized to harness the potential of emerging technologies and contemporary application management strategies. These systems are ill-equipped to meet the escalating demands of the market, and there exists a growing concern that they might soon expose banks to additional risk and liability.
Legacy systems are ill-equipped to meet the escalating demands of the market, and there exists a growing concern that they might soon expose banks to additional risk and liability.
Moreover, the operation and maintenance of these legacy systems are becoming progressively burdensome and expensive due to the scarcity of experts possessing the necessary technical expertise and institutional know-how to support core systems designed for a different era.
Some legacy systems are so old that they cannot interact with other systems. As technology accelerates, everyone is required to modernize, otherwise they can be exposed to downtime when it is least expected. Most legacy systems have aged to the extent that they are incompatible with older systems. As technology advances rapidly, modernization has become both imperative and essential, as failure to do so can result in unexpected downtimes.
Legacy systems present a number of difficulties. These include, but are not limited to, expensive maintenance, poor security, lack of web and mobile compatibility, non-compatibility with other enterprise programs, the inability to meet current standards and other requirements alongside slow/poor performance. The majority of these difficulties cannot be rectified, so it is the need of the hour to update to modern technology platforms.
Banks in Australia that lag behind in cloud migration are depriving themselves of access to innovative development services, on-demand scalability, enhanced security, API gateways, and perhaps most significantly, extensive capital expenditure savings.
Modern technology platforms, primarily those that are also available on the cloud, produce a diverse range of benefits for banks and other financial institutions. To sum them up swiftly - Flexibility, scalability, lower risk, greater operational efficiency and digital competiveness. Essentially, all these lead to reduced costs, and subsequently, higher profitability. Banks in Australia are confronted with a significant endeavor to update their legacy backend architecture and systems with modern technology platforms that will not only streamline their processes, but will essentially futureproof their business.
Redefining possibilities: In the cloud we trust
A key finding from the Global Banking Benchmark Study 2022 related to Aussie banks affirming that their primary focus over the upcoming years lies in investing in core banking systems based on the cloud. Numerous banks in the country have already transitioned or are in the process of moving to the cloud and attaining the imminent benefits it brings.
"Banks are looking at how to use the cloud, not just as a tech platform, but as a catalyst for transforming how the business actually works," stated Angelo Joseph, Head of Customer Engineering for Google Cloud in Australia and New Zealand.
Banks are looking at how to use the cloud, not just as a tech platform, but as a catalyst for transforming how the business actually works. - Angelo Joseph, Head of Customer Engineering for Google Cloud in Australia and New Zealand.
Studies indicate that for Australian enterprises, including those in the finance sector, to maintain their competitiveness, a substantial portion or the entirety of their IT infrastructure should be migrated to the cloud by 2025. Gartner speculates that by that time, more than 95% of new digital workloads must be implemented on platforms inherently designed for cloud deployment.
Major banks have primarily highlighted cost reduction and shorter development cycles as notable advantages of cloud adoption. However, the advantages offered by cloud technology extend far beyond these immediate gains. Banking software and banking technology solutions on the cloud expedites business processes, leading to swifter data insights, shortened application and update development cycles and robust disaster recovery strategies. These benefits collectively empower major banks to place a stronger emphasis on enhancing the customer experience.
Detailing one of Australia's Big 4 - National Australia Bank's (NAB) transition to the cloud, Cloud Executive at NAB Roger Schobben spoke about how shifting to the cloud transformed their operations. The bank has now moved 70% of its applications to the cloud and recently became the first major Australian bank to migrate its online business banking platform and global trading platform. By utilizing AWS's tech (NETSOL is a select-tier partner of AWS), NAB has implemented a program to save over $1 million monthly in cloud costs.
"Prior to this acceleration, our operations were frozen in time - we were still operating like we were in the 1990s with big monolithic platforms and a waterfall mindset," he stated. "Our systems were highly process driven, but in a very manual way, and it took us a very long time to roll out new products and services that our customers really needed."
Established players within the industry who fail to leverage public cloud applications and micro-services for cost reduction, accelerated provisioning, exceptional customer experiences and the creation of new product and service offerings, run the risk of becoming insignificant as compared to cloud-native competitors, who have a clear competitive advantage. Moreover, banks and financial institutions in Australia that lag behind in the process of cloud migration are depriving themselves of access to innovative development services, on-demand scalability, enhanced security, API gateways, and perhaps most significantly, extensive capital expenditure savings.
A focus on security and risk oversight
The series of cyber intrusions targeting Australian businesses in late 2022 stands as a cautionary signal. It underscores the urgent requirement for banks and financial services organizations to modernize their core architecture and underlying systems responsible for handling transactions, deposits, loans and credit, which are integral to ensuring business continuity.
As per experts in the banking industry and as observed during keynotes given during the recent Australian Banking Association Conference 2023 in Sydney, Australia has a stable financial system regulatory framework, but the threat of cyber security lingers high and needs to be handled in an efficient manner. This includes the safety and resilience of payment systems. This is where digital innovation plays a key role as more banks are paying considerable importance to functions such as multi-factor authentication and AML solutions for reducing the risk of scams pertaining to banking operations. However, with such innovation, the challenges of digital transformation go in parallel vis-a-vis to moving from legacy to next-generation, modern technology platforms.
As banks adopt digital technologies, they face the challenge of ensuring robust security and risk management. Australian banks have invested heavily in cybersecurity measures to protect customer data and prevent fraudulent activities. Advanced encryption techniques, multi-factor authentication and real-time transaction monitoring systems are some of the measures implemented to mitigate risks. However, banks must remain vigilant and adhere to emerging cybersecurity threats to maintain the trust and confidence of their customers.
Amid the surge of cybersecurity risks, the process of digital transformation equips banks with sophisticated and stringent security mechanisms designed to shield customer data and thwart fraudulent undertakings.
Amid the surge of cybersecurity risks, the process of digital transformation equips banks with sophisticated and stringent security mechanisms designed to shield customer data and thwart fraudulent undertakings. These measures encompass biometric authentication, encryption, blockchain and continuous real-time monitoring, collectively ensuring the utmost security and safeguarding of customer information.
NETSOL's modern technology platform, digital transformation solutions and API-first offerings for Australian banks
NETSOL has been proudly serving banks and the global asset finance and leasing industry with smart technology solutions for over four decades. The company's premier platform NFS Ascent enables banks in Australia and worldwide, to manage their retail and wholesale finance and leasing business seamlessly, and essentially futureproofs their operations. It is designed to empower banks and financial institutions with a platform that supports their growth in terms of business volume and transactions.
Ascent is also available on the cloud, enabling smaller banks and financial institutions to gain immediate access to the same unrivalled platform used by bluechip and Fortune 500 companies worldwide without having to pay any upfront license fees! Ascent on the Cloud is available via flexible, subscription-based pricing, rapid deployments and the ability to scale on demand. To explore Ascent, click here. To Contact Us or for a FREE demo of Ascent, click here.
Ascent is also available on the cloud, enabling smaller banks and financial institutions to gain immediate access to the same unrivalled platform used by bluechip and Fortune 500 companies worldwide without having to pay any upfront license fees!
NETSOL takes immense pride in being the pioneer in the global asset finance and leasing industry to offer a full suite of digital transformation solutions - NFS Digital. These digital products are essentially curated digital touchpoints for a bank or financial institution's teams, partners and customers. Our digital transformation solutions are extremely robust and can be used with or without our core, next-gen solution (NFS Ascent) to effectively augment and enhance a client's ecosystem. To explore our suite of digital solutions, click here. To Contact Us or for a FREE demo of NFS Digital, click here.
NETSOL introduced AppexNow - the first marketplace for API-first products specifically for banks and the global credit, finance and leasing industry. The marketplace provides a suite of cloud-based, API-first products that cater to a broad spectrum of needs. The API-first strategy enhances development efficiency, reduces complexity, mitigates risk and facilitates integration with diverse systems and platforms. To explore AppexNow and its products, click here.
NETSOL's first product offering from the AppexNow marketplace Flex is an instant cloud-based calculation engine for out-of-the-box integration into a bank or financial institution's products, services and ecosystem. Flex is an API-based, pure-play SaaS product that is a one-stop solution which guarantees precise calculations at all stages of the contract lifecycle through various calculation types. All the calculations are parameter-driven, which helps perform simple, multi-dimensional or complex calculations based on the needs of a bank or financial company. To explore Flex, which has an onboarding time of mere minutes, please click here.
With an onboarding time of mere minutes, Flex is an API-based, pure-play SaaS product that is a one-stop solution which guarantees precise calculations at all stages of the contract lifecycle through various calculation types.
The unprecedented global health crisis significantly catalyzed the pace of digital advancement within the banking and financial services sectors. However, numerous Australian banks are encountering obstacles in their digital strategies pertaining to outdated technologies. Overcoming these challenges becomes paramount for banks to streamline internal processes, ultimately enhancing customer experiences, optimizing efficiency and substantially reducing expenses.
Globally, investing in technology is swiftly transitioning from an optional expense to an essential aspect of conducting business. This is driven by organizations striving to keep up with ever-changing customer demands, while digital disruptors consistently challenge the boundaries of what contemporary systems can deliver.
Digital transformation has become the cornerstone for Australian banks to thrive in the evolving banking landscape. The shift towards digital channels has improved operational efficiency, enhanced customer experiences and fostered innovation. However, banks must prioritize cybersecurity and risk management to protect customer data and maintain trust.
Digital transformation has become the cornerstone for Australian banks to thrive in the evolving banking landscape.
Looking ahead, Australian banks need to embrace emerging technologies and ensure inclusivity to not just streamline but futureproof their operations, meet the future demands of customers and remain at the forefront of the digital banking revolution.
Mekayl Mashhadi Ahmed, Global Marketing Manager at NETSOL Technologies Inc.
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