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May 3, 2016updated 05 Sep 2016 11:50am

Online and mobile banking services supplier disruption will hit banks hard

News: Gartner has a warning for both banks and existing suppliers.

By Joao Lima

By Gartner’s estimate by 2019, 25% of retail banks will use startup providers to replace legacy online and mobile banking systems.

Today’s vendors have been slow to adapt to banks’ digital needs, customers’ requirements and intense pressure to increase efficiencies and reduce costs, the analyst warned.

Banking technology roadmaps are set for massive disruption as startups and emerging digital banking platform providers are set to replace current application vendors.

These new vendors challenge the traditional "often incumbent vendors of traditional online and mobile banking and core banking solutions".

Gartner said that banks should be looking at emerging technologies such as open unified banking platform solutions as these make it possible to deliver new digital products and services, and create a multidimensional customer experience across all devices and channels.

The new vendors are proving to have the digital capabilities that allow banks and IT to deliver apps and applications that support personalised, customer-centric banking experiences, data and behavioural analysis, location and context sensitivity and creation of a partnership ecosystem to create new services leveraging partner data, transactions and processes.

Incumbent vendors have not been able to adapt and support open architectures that decouple the presentation of services from the services and transactions themselves.

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This is placing large retail banks behind challengers in the digital race as they are unable to combine new and existing processes to offer innovative digital services.

As a result, Gartner has advised bank CIOs to collaborate with business leaders and other key stakeholders to understand how well prepared their organisation is to use technologies by the mentioned new providers and their risks, especially financial technology startups.

Bank CIOs have also been warned to be prepared for extensive, potentially disruptive changes in this market, including merger-and-acquisition activity, heightened competition and new entrants from other geographic regions.

Stessa Cohen, research director at Gartner, said: "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 do not use that as a reason to exclude new vendors."

Elsewhere, disruption has already occurred when Bitcoin was created back in 2009. Much debate has gone into who the inventor of the digital currency was, and this week Australian scientist Craig Wright has claimed to be the man behind the coin.

However, the banking industry is moving at such a fast pace that Bitcoin is starting to be dropped out of banks and technology companies’ talks, according to Reuters.

The message was given by executives at the Consensus 2016 conference in New York.

They said blockchain technology, which uses distributed databases to maintain a real-time growing list of data records, is a space which banks could be looking at more closely, and this does not include Bitcoin solely.

Yet, they recognised the digital currency is today’s largest roll out of blockchain technology.

Jerry Cuomo, VP of Blockchain Technologies at IBM, said: "If there is a 100% opportunity in the blockchain, bitcoin, or the currency, is only 1% of it.

"So there is a whole 99% that has broad applications across the broad industries."

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