68% of CIOs in India do not Prefer Build Strategy Approach for Banking Platforms, shows New Studies

Backbase, the global leader in Engagement Banking, announced the publication of an APAC-focused IDC Infobrief titled "Accelerating Customer-Centric Transformation by Balancing Build and Buy - A Collaborative Approach Towards Sustainable Digital Banking Architecture." ,On  Aug 25. This in-depth report offers a regional perspective on digital transformation by drawing insights from 125 banks and 316 CIOs in APAC, including the Indian market.

According to the Infobrief, 80% of digital engagement platforms built in-house with budgets exceeding $10 million underperform and fail to produce the desired ROI in their digital initiatives.

Online banking and the shift to a cashless society started approximately three decades ago in India and this year, 91 billion digital payment transactions have been recorded; today India ranks first in the number of digital payments made globally. This transition showcases the country's rapid embrace of digital financial services and underscores the importance of a customer-centric digital banking ecosystem.

“In India, we are working with established and modern banks like HDFC as early as 2016. Our Engagement Banking Platform equips them with the agility to address swiftly evolving retail banking needs, a challenge compounded by the extensive customer base they serve. Today banking in India goes beyond delivering a comprehensive portfolio of banking services;  consumers expect banking experiences to be on par with familiar lifestyle ecommerce and social media platforms. This is in the wheelhouse of our platform – to empower banks to continuously calibrate new journeys and experiences around their customers,” said Riddhi Dutta, Regional Vice President, Asia of Backbase.

The Shortfalls in Digital Experiences

Despite having embarked on digital transformation since the 2000s, many banks in APAC remain at an early stage, failing to fully capitalize on its benefits and deliver compelling digital customer engagements.

“Building in-house has been a de-facto strategy by banks, but it’s no longer feasible to deliver to the pace and scale that is required to be competitive. The complexities that come with the extensive amount of data layers, channels, features, upstream and downstream integration that needs to support legacy and modern systems to manage and orchestrate sophisticatedly is where in-house implementation breaks apart,” said Ashish Kakar, Senior Director of Research, APAC of IDC.

According to the IDC Infobrief, there is a critical disconnect between banks and their customers, with most banking products and offerings being "me-too" and limited. The Infobrief matrix categorises medium to large-sized banks in India, along with the Philippines and Malaysia, in the 'Legacy' quadrant. India is rapidly moving into the Champion quadrant, but there are still a significant number of banks in the country that take the traditional approach to IT, viewing it as a cost centre rather than a transformation differentiator.

Customers struggle to access multiple services via disparate interfaces, lack a unified view of their portfolios, and must endure lengthy onboarding processes. Customers continue to be unsatisfied with personalised experiences, segmentation, and relevant promotions based on their lifestyles, life moments, and goals. Furthermore, backend operations suffer as a result of a lack of intelligent assistance in contact centres, which causes customers to repeat information to different service officers due to the lack of a 360-degree unified customer view. This is a result of banks focusing on locking in a high amount of resources getting banking platforms into shape instead of prioritizing the creation of differentiated upstream customer journeys and experience.

“Over 150 modern and forward-looking banks have adopted and built on top of Backbase’s Engagement Banking Platform to accelerate their go-to-market visions and prioritize innovating differentiated digital customer engagement and experiences. A true platform comes with all the hygiene requirements from market fit, to security and regulatory compliance, to being versatile and customizable to support each bank’s unique customer needs. The platform is a compassable fabric providing modularity and re-usable data and journeys for banks to help banks future proof at scale, said Riddhi Dutta, Regional Vice President, Asia of Backbase.

Trends in banking platform technology investments in India:

Multiple examples of in-house build failures have been observed, including cases where top consultants were engaged. For example, a leading bank enlisted a top consultant to build a digital corporate bank, but the project has been ongoing for the last three years.

Digital transformation and CX are important, and India’s central bank (RBI) is actively supporting these initiatives. RBI allows registered banks to open new digital centers without explicit approval from RBI. Additionally, RBI is facilitating digital lending by providing a Default Loss Guarantee

A Shift in Mindset: Embracing "Adopt and Build" for Accelerated Growth

The analysis in the IDC Infobrief finds the “Adopt and Build” approach a pragmatic solution for banks to accelerate their go-to-market efforts, differentiating where it matters instead of reinventing the wheel by building from scratch. By adopting a collaborative platform and building upon it, banks can achieve 40% faster time-to-market, where digital engagement banking platforms can be launched within 11 months, as compared to the traditional 20 months with a full "build" approach. In addition, “Adopt and Build" had proven to be 2.3 times more cost-effective than the traditional in-house "build" option.

The "Adopt and Build" approach was rated highest and demonstrated tangible advantages in comparison to the "Build" and "Buy" approaches across six key metrics—market fit and differentiation, legacy risk, build risk, time to market, modernise talent & IT skillset, and regulatory compliance.

This IDC Infobrief is the first of two consultative guides commissioned by Backbase to help banks evaluate a more effective platform strategy that can drive accelerated and differentiated digital customer engagement.