The next generation of banking technology

Becoming a digital bank is hard. Sustaining a successful digital bank is even harder. However, as the world’s leading “neobanks” start to make their core technology available for broader consumption, could things be about to change?

An evolving market

Globally, banking is a sector that has grappled with technology.

Despite hefty investments, banks of all kinds have struggled to leverage technology to their full advantage, falling short against the expectations of today’s digitally-savvy customers.

In response to this challenge, banking software is becoming increasingly well attuned to what “banking” means in a digital economy. The software market supporting the industry has rapidly evolved in recent years, helping to reduce the barriers to modernisation and innovation.

“Neo-cores” are challenging established software brands, bringing new features and functionality that deliver improved outcomes for banks and their customers.

Today, we see a much more dynamic banking software market, with more options for where banks can invest their technological spend.

The next generation

But the next generation of banking technology innovation is also fast following.

Leading “neobanks” are disrupting the market even further by making their proprietary technology available for broader consumption. These neobanks have started with point solutions, but are now beginning to offer more.

Some neobanks are now licensing their full technology stack directly to clients. They are offering the capabilities of other core banking platforms in addition to the award-winning customer channels (mobile and web) that have made them a success in the market.

The critical differentiator, however, is that they bring the experience of an operational bank. In other words, they have built the technology on which their own operations are run.

Not only does this mean that consumers of their technology get a next-generation platform, it also means they have a blueprint for how to successfully operate like a disruptor - invaluable for financial institutions looking to radically transform.

This offering of a proven, customer-ready platform, alongside the operating blueprints of a successful digital bank, provides the opportunity to adopt a fundamentally different business model - one that is likely far simpler, faster and cheaper than the business models of many banks today.

Instead of dealing with the legacy technology causing day-to-day business inefficiencies, banks now have the opportunity to refocus their efforts, prioritising - amongst other things - customer growth and retention.

Case study: Engine by Starling

One company that is now offering its core technology to the global banking market as a Software-as-a-Service (SaaS) platform is Starling Bank, a UK neobank that has been working side-by-side with PwC since 2015.

Engine by Starling provides all of the components needed to run a highly competitive and cost-efficient bank. However, it is more than just a core banking platform, as consumers of the technology can rapidly launch new products that come fully developed with award-winning user functionality.

Implementing banks of the future

Given the velocity of change we are seeing in the banking software market, PwC is now partnering with organisations, such as Engine by Starling, to help clients implement the right solution to stay ahead of the curve.

Leveraging our experience in the market, we see the following factors as critical to succeed when taking advantage of new banking technologies:

Selecting the right platforms
Behaving as a disruptor
Winning customers over

Selecting the right platforms

There is no point in licensing a platform and then trying to change everything about it to create a “better version”. Rather, organisations need to choose the relevant technology partner – or partners – to work alongside, and have confidence in their ability to deliver the capabilities they need. This means doing the adequate research to select the right platform(s) for an organisation’s needs today as well as in the future.

Behaving as a disruptor

Once the platform is up and running, it is critical to establish the appropriate business structures around the new solution. However, it is even more important to instil a culture of curiosity, creativity and collaboration around the digital platform. By empowering employees and shifting their collective mindset, an organisation can truly become a disruptor.

Winning customers over

Organisations need to make themselves relevant to customers, in order to achieve acquisition and growth by effectively marketing their digital proposition. This means not just showcasing the product to customers, but also leveraging the data from the digital product, understanding it and using it to inform strategic, marketing and business development decisions.

While the challenges are still real, launching or revamping a digital bank is being simplified by a new banking technology landscape. Combining the right platform partners with the implementation expertise and industry knowledge of PwC, organisations can focus on growing their business instead of having to struggle with technology.

To learn more about digital banking or our partnership with Engine by Starling, please contact us.