The digital conference centred on the important topic of how technology can be used to increase access and build new services for customers. Learn more about the takeaways in part one of the Q&A series below or watch the fireside chat here.
Liz: What are the big changes you’re seeing in the banking industry right now?
Werner: There is a clear decline in the issuing of new banking licences. There is also less risk capital available for the whole fintech space due to the macroeconomic environment. Additionally, large incumbent banks are increasing interest rates and are in much better shape than before, so they’re often spinning up their own fintechs or spinoffs and stepping in that direction.
Liz: Yes, we’re seeing this interconnected ecosystem of incumbent banks and new fintechs starting to grow together. You mentioned interest rates, what are some of the other specific changes that have happened in the past year?
Werner: Banks came to the realisation that they must do something, meaning they must move much faster away from legacy systems to better serve the demands of their end customers. Demands from customers have changed, due to our situation in the past years with the pandemic. Banks see a need to accelerate to be more agile.
Liz: When we talk about the acceleration caused by the pandemic, what is the measurement of that change? The banking and FI industry has experienced a lot of change in the past year, but how many years have we shaved off in the shift to digital?
Not enough banks took the need to transform seriously enough pre-pandemic. Now everybody knows it’s not a question of 'if' we’ll do this, but of 'when'.
Werner: People are more sensitive to what’s happening to their money. The time spent at home from the pandemic created much more demand, for instance we see this with wealth management. With zero interest on checking or deposit accounts, people realised they want to get smarter about their finances. This generates new demand, and banks and FIs need to find a way to serve this. As a result, there comes the acceleration of the need to deliver digital services much faster to end customers. The pressure is on, and also loyalty to incumbent banks is only decreasing.
Liz: There are a lot of technological changes affecting people’s lives that come from other industries: online shopping, children’s schooling. How is the banking sector keeping pace with these new technologies in our lives?
Werner: Very clearly, not fast enough. The reality is that the legacy core migrations are so difficult, and the situations the banks got themselves into makes it so they can’t move in an agile way. They’ve built up these monsters over decades with data centres that make it very hard to deliver something new and are inflexible. They’ve come to the realisation that they cannot easily migrate gigantic monoliths to a new system.
They love to create complete snowflakes with inflexible legacy technology, and this way they create monsters.
Werner: Not too long ago, I had a conversation with a Fortune 100 bank, and they put the demand on us to state in their contract that they’re not allowed to customise the software. With Mambu, this is actually not necessary as we're SaaS-based, but the point is that they tried to protect themselves from falling into the trap of what they did in the past. The question is: how do they get out of it? A mass migration will take decades, so they need to see how they can chip away. Today's financial institutions need to provide new offerings without relying so heavily on IT resources. Product managers should be able to build something without needing developers to create these products.
Learn more about Mambu's composable approach to banking and lending here or stay tuned for part two of the Q&A series.