RESEARCH REPORT
Reinventing with the Digital Core in Banking
10-minute read
November 29, 2024
Our recent analysis of 83 banks across 10 countries reveals that a “reinvention-ready” digital core is non-negotiable today. Generative AI is an accelerator for banking leaders, enabling them to successfully navigate ongoing change and harness the full potential of emerging technologies.
Explore the anatomy of the digital core
We define the digital core as the critical technology capability that can create and empower an organization’s unique reinvention ambitions.
It enables organizations to accelerate ahead of competition and achieve their ambitions—using the right mix of cloud infrastructure and practices for agility and innovation; data and AI for differentiation; applications and platforms to accelerate growth, next-gen experiences and optimized operations—with security by design at every level.
The good news is that banking executives are preparing…
99%
report technology as the top lever for reinvention, gen AI seen as one of the main drivers.
73%
report that they are accelerating innovation spending compared to the period from 2020 to 2022.
42%
of banking executives are actively engaged in implementing a transformation program.
80% of banking executives plan to use gen AI to reinvent their IT function:
However, we identified some challenges that executives are concerned about...
The main shortfall for banks is in cloud infrastructure. They are particularly struggling with making apps cloud-native and integrating cloud into work practices, which is essential to build a digital core.
…and other barriers hindering banks from adopting digital core technologies.
21%
of them identify misalignment of priorities between business and IT as a strong barrier.
20%
identify a lack of skills or talent shortage as hindering.
Barriers impeding the adoption of digital core technologies
Here are 3 key actions for banks to achieve a reinvention-ready digital core:
01
Build an industry-leading digital core tailored specifically to your industry and company
While around 40% of banks report mature development in one or more digital core components, none have been able to achieve maturity across all components simultaneously, which is essential for a reinvention-ready digital core.
02
Boost innovation investments in strategic innovation, including re-engineering systems for machine (AI) operation
Most banking executives plan to allocate ~ 8% of their IT budgets to support new business capabilities, enabling a shift from maintaining operations to fostering growth.
03
Balance technical debt liabilities with investments for the future, using programmatic and autonomous methods
To drive growth, banks should prioritize optimizing business and IT processes, enhancing enterprise applications and platforms, and bolstering security measures.
And following the 3 actions pays off…
3-8 pts
is the potential return on equity boost that can be achieved by banks
60%
higher revenue growth rate and a significant 40% higher profitability can be achieved by companies (across industries)
So, where could reinvention take your business?
For banks facing the dual challenges of innovation pressure and operational efficiency, the transformation towards an industry-leading digital core is essential. By embracing this strategic shift, banks can harness the full potential of generative AI and stay ahead of the competition.
