But unlike in past recessions, today technology can cushion the blow, especially for institutions extending credit. Composable, cloud-based banking, for example, allows not only for greater flexibility and better user experiences, but it can lower costs as well, and cutting costs can be key to survival when the economy takes a bruising.
Mambu recently analysed data of Latin America’s leading banks and found that annual IT budgets account for an average of 0.31% of assets, more or less in line with Europe’s 0.28% figure, though Europe is home to much lower overall costs. From that total, 16-30% is spent on developing and maintaining core-banking platforms and that number has room to fall.
Replacing the core banking platform with a “last-generation” solution can cut IT costs by 9%, according to CapGemini research. Which is already quite a sizable figure, however, cost-reduction comes to 50% when banks migrate to “next-generation” cloud-native banking platforms, such as the one offered by Mambu*.
These noteworthy savings stem from an elimination of protracted upgrade cycles (e.g., 35% reduction in IT headcount), faster and cheaper new-product launches (e.g., 85% reduction in time to market) and simplification of application landscapes through modern architectures.
Payback times speed up to around 12 months compared with “last-generation” platforms, where payback times can exceed four years.
Granted many Mambu clients were born on the cloud, so these figures may not seem applicable, though they do illustrate the cost savings when compared to on-premises IT systems. And not everyone can truly claim to be completely free from legacy systems.
Tech Spending Shrugs Off Recession Scare
Since access to credit is the lifeline for the global economy in both good times and bad, and since cloud banking has expanded the reach of banking services to countless types of businesses, competition has never been more fierce. That’s where Mambu comes in.
Banks, lenders and fintechs who run on our engine and process orchestrator enjoy the flexibility to anticipate and adapt to changing market conditions and keep user experiences optimal at lower costs. And since user experiences will remain of utmost importance, expect tech spending to take high priority while other budgets go to the chopping block as the global economy cools.
In the U.S. for example, banks’ investment in technology should increase 10.6% year over year in 2022, faster than in any previous year, according to Insider Intelligence. That’s because everyone knows digital banking is here to stay with 73% of consumers citing usage of mobile apps once a week (up 8% on year).
Furthermore, 93% of survey participants said they have used one or more digital payment methods in the past year (up 5% year) due to its ease of use, convenience and time-saving benefits. Plus, it makes tracking finances easier.
As more and more people join the banking system, user experiences will only grow in importance. Convenient apps, services like pay later plans and quick and seamless processes related to anything from loan origination, Know Your Customer and regulatory filing will all be par for the course to succeed.
Recessions will come and go, and since the next one is rearing its ugly head on the horizon, controlling costs will become increasingly important – let the cloud help you.
Mambu can free you up from the chains of legacy systems to emerge into better times as a lean and profitable success story.
Recessions come and go. Keep your customers satisfied and loyal through the good and the bad.
*Aggregated and anonymised client data from H2 2020; cohort of clients (retail and small business offering both lending and savings) with 36 month minimum operation pre-migration to Mambu.