Banks Must Cut Out Innovation Setbacks in Order to Keep Up With Consumer Product Demands

One hundred and fifty heads of innovation at UK retail and business banks were asked about some of their biggest ongoing struggles to understand customer needs in a new report by SaaScada. There seems to be a divide in what consumers want vs want banking providers think they want.

Data-driven core banking engine, SaaScada reveals in its Boosting Net Interest Margins: Why Banks Must Not Wait To Innovate report, that 76 per cent of banking innovation heads said it was important or critical to increase the number of banking products on offer. However, less than one in four customers uses more than one product (23 per cent).

Identifying pain points

Other major struggles identified in the report include an increased pressure to innovate, grow their profitability and increase their share of wallet with existing customers. It shows that as balance sheets grow, banks are under increasing pressure to innovate. Amidst increased interest rates, 70 per cent of banks have seen the total value of their balance sheet grow in the past 12 months. At the same time, 77 per cent say the pressure to innovate has increased over the past 12 months.

Furthermore, it shows banks are struggling to understand their customers’ needs and sell new, relevant products to them. In fact, 90 per cent agree they need to understand customers better to stay ahead of competitors. However, they often fail to follow the data.

Eighty-one per cent agree customers are likely to switch to a bank that aligns with their social values. However, just 22 per cent think they should be considering launching a product focused on sustainable and ethical investments.

Nelson Wootton, CEO and co-founder, SaaScada

Nelson Wootton, CEO and co-founder, SaaScada commented: “Right now, UK banks are under immense pressure to balance the opposing levers of growth and profitability. To increase their net interest margins, banks should tap into the treasure trove of customer data they have access to.

“This data reveals spending habits and challenges, but is currently slipping through banks’ fingers. By getting a handle on their data, banks can better understand customer needs, and launch lucrative and innovative products to address them. If not, they will find themselves left out in the cold.”

Remaining competitive 

The report warns that banks who can’t launch new products at speed to grow profitability will see net interest margins shrink. Seventy-five per cent of respondents agree that to survive, banks need to launch products in months not years. Yet it takes an average of 8.4 months to launch a new product, with nearly half (45 per cent) of banking innovation heads saying by the time they launch new banking products, they are already outdated.

Compounding the issue is the fact the industry continues to be plagued by setbacks. In fact, 51 per cent have experienced delays in launching a new product in the last 12 months, with an average delay of over three months. Delays caused affected respondents to lose out on a total of £51.1million.

Other challenges cited by respondents that had experienced project delays include:

Sixty-six per cent say delays wasted time, money, and resources
Sixty-six per cent were called in front of the board or leadership to explain the issues
Sixty-four per cent had to scrap or delay other projects
Fifty-one per cent attracted increased regulatory scrutiny

Wootton continued: “Banks must focus on improving their agility to avoid lengthy, costly product delays. To meet this goal, banks need to assess their core banking systems, and gauge whether these are agile enough to develop new products and services at pace. Lastly, truly cloud-native core banking platforms are the only way banks can bake insights and flexibility into their product offerings. Without this capability, banks will fall behind the competition and fail to keep up with soaring customer expectations.”

The post Banks Must Cut Out Innovation Setbacks in Order to Keep Up With Consumer Product Demands appeared first on The Fintech Times.

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