Rapid Changes Spur Digital Transformations at U.S. Banks

U.S. banks are modernizing their technology and business models at an accelerating pace in response to competitive pressures, higher customer expectations and ongoing changes in regulation, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2022 ISG Provider Lens Digital Banking Services report for the U.S. finds that banks face new competitors, an increasing focus on the climate impact of investments and a growing demand for new types of retail and business banking experiences. These changes and others are driving banks to implement more flexible next-generation technology platforms and business processes, often in partnership with service providers.

“The U.S. banking industry is aggressively carrying out transformation initiatives in digital banking,” said Owen Wheatley, ISG’s lead partner for banking and financial services. “Banks are seizing opportunities for innovation by seeking out different types of service, technology and platform providers, as well as reimagining relationships with existing partners as part of a push toward next-generation ecosystems.”

The strong U.S. trend toward online and mobile banking accelerated during the pandemic, and new kinds of payment and banking platforms are still hitting the market, ISG says. Traditional banks are implementing cloud-based platforms to compete with products from well-known players, such as Apple Pay, and new types of lending, investment and credit card offerings from FinTech startups.

Next-generation banking platforms have entered the production phase at many traditional banks, allowing them to achieve significant automation and operate at a fraction of previous costs, the report says. Banks are modernizing so they can add capabilities such as banking-as-a-service offerings and the use of open banking APIs for integration of FinTech solutions from external partners.

Tightening U.S. regulations also are driving banks’ investments in new technologies. ISG expects regulators to require more comprehensive capital and liquidity planning to prepare for future disruptions like the pandemic, and cybersecurity compliance rules add to the requirement for resiliency. Banks are also modernizing systems for monitoring and reporting the greenhouse gas emissions associated with projects they fund.