Finextra and Five Degrees ‘Invigorating Banking’ survey shows: “core is crucial”

Breukelen - 9 February 2015

61% of global respondents agree that core banking replacement needs to take place in three to five years

After years of focus on the front office, mobile and channel, banks agree that the issue of core banking migration for the benefit of true modernisation can no longer be ignored. This is one of the striking results of the ‘Invigorating Banking’ survey, that Dutch FinTech company Five Degrees unveils the day before Finovate 2015 in London. The survey, which has recently been conducted in co-operation with Finextra, also shows that 65% of the respondents agree that their current core technology no longer support its needs.

The survey was conducted in the last quarter of 2014 with the aim to identify the need for core banking transformation in order to modernise the banking environment in the current climate of technology advances, regulatory pressure and changing customer behaviour. With 126 responses from 96 financial institutions representing 38 countries, the survey gives a good flavour for the appetite for change, the drivers, drawbacks, customer demand and the benefit/threat of new entrants.

Modernisation into the core

Most poignantly, 65% of the banks agree that the modernisation issues can no longer be fixed with ‘skins’ and upgrades of the channel and front end technology. With the rise of API banking, the regulatory push for a more transparent and level playing field, lets banks realise that modernisation needs to be taken into the core of the banking infrastructure as well. In terms of drivers most banks agree: 96% want a seamless experience across all channels, 87% aim for self-service, 74% want/need to drive cost down and 63% of the respondents want to prepare their bank for the world of APIs. 64% of banks feel that customers prefer simplicity over a rich user experience and 43% say they find it hard to get boardroom sponsorship for a cumbersome project like core modernisation and 40% fell they lacked a strategic modernisation plan. Finally only 15% would stick with their current technology provider that did not provide open standard (SOA) technology. 33% stated they would consider working with a new vendor with state of the art technology, even one with fewer references than the incumbent players.

Martijn Hohmann, CEO: “In the past few years all fintech innovation centered on mobile tools, skins and layers around the channels and the front office. However in our daily practice of helping both existing banks as well as new banking operations build or migrate to a digital banking environment, we found that only limited benefits can be achieved from that approach. These solutions are just new wrappers on old legacy systems. Creating a rich dialogue driven middle office enables a bank to truly embrace the opportunities and challenges of today’s climate. Matrix, Five Degrees’ next generation banking platform, is a game changer for modern banking and represents the only viable option for this customer centric core approach. The study confirms our instinct and observations: the time is finally ready to put core banking transformation back on the agenda: a rich mid office, a front office that is access – not channel – driven and a lean back office that is slimmed back to its admin duties. The new open banking landscape that is looming is not a threat to banks, but very much an opportunity and we are happy to work with those who view it that way”.

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