Adopt And Build A Strategy To Grow ROE For Digital Initiatives

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  • The Infobrief reveals that 65% of mid to large-sized banks in APAC chose to develop their engagement banking platforms internally to pursue digital transformation. Yet, 70% of these initiatives have been unsuccessful because of in-house projects’ extensive costs and time-consuming nature.
  • Many banks in APAC are not fully leveraging the advantages of digitalisation, resulting in subpar digital experiences and creating a gap between the banks and their clientele.

Backbase recently launched its APAC-focused IDC Infobrief titled “Accelerating Customer-Centric Transformation by Balancing Build and Buy”. This detailed analysis shares findings from 125 banks and 316 CIOs within the APAC region, particularly emphasising trends in the Indian banking industry. The report discloses that 80% of in-house digital platforms, built on budgets surpassing USD10M, fail to perform as expected and have yet to achieve the anticipated Return on Equity (ROE).

India’s journey towards a cashless society began nearly three decades ago. Today, with 91 billion digital payment transactions this year, India leads globally in digital payments. Such strides emphasise the growing need for the country’s robust, customer-centric digital banking environment.

Backbase’s association with renowned Indian banks like HDFC dates back to 2016. Riddhi Dutta, Regional Vice President of Asia at Backbase, stated, “Our Engagement Banking Platform grants agility to swiftly cater to the changing retail banking demands, a significant challenge considering India’s vast customer base. Modern banking in India is expected to mirror familiar e-commerce and social media experiences, and our platform is designed precisely for this.”

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The Limitations of Digital Experiences

There have been considerable gaps in digital transformation. Even after initiating the shift in the 2000s, numerous APAC banks have not realised the full potential of digitalisation. Ashish Kakar, Senior Director of Research, APAC at IDC, pointed out the inadequacy of in-house strategies in meeting the current demands and complexities of modern banking.

This warns of a disconnect between banks and consumers, with many banking services viewed as generic and uninspiring. Many Indian banks still cling to traditional IT approaches instead of treating IT as a transformative tool. Customers’ demands for streamlined processes, instantaneous approvals, and personalised banking experiences remain largely unaddressed. Banks, rather than focusing on unique customer journeys, have concentrated excessively on refining their platforms.

Over 150 progressive banks have integrated Backbase’s Engagement Banking Platform to enhance their market reach. The platform’s comprehensive capabilities from ensuring market relevance and regulatory compliance to flexibility in meeting distinct customer requirements.

Indian banks have witnessed multiple unsuccessful in-house projects, some even with the involvement of top consultants. The country’s central bank, the RBI, continues actively supporting digital endeavours, permitting banks to establish new digital centres without explicit approval.

Evolving Investment Patterns in India’s Banking Platform Technology.

Multiple 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.

Mindset Evolution: “Adopt and Build” Approach for Rapid Expansion.

The “Adopt and Build” approach is championed as a method that allows banks to enter the market 40% faster. When evaluated on diverse criteria, this strategy stands out, proving to be more cost-effective and efficient than conventional methods. It’s 2.3 times more economical than the in-house “build” choice. This approach consistently ranks supreme when gauged against six metrics, namely market fit, differentiation, risks associated with legacy and building, time-to-market, advancement in talent & IT skills, and regulatory adherence. It demonstrates clear benefits over the traditional “Build” and “Buy” methods. This pivotal Infobrief, the first in a series of two commissioned by Backbase, aims to give banks practical insights to refine their digital trajectory.

 

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