Can banks innovate fast enough in the wake of COVID-19?

Frankfurt Skyline with St. Catherine’s Church, Hauptwache, and the financial district

The pandemic ushered in a new wave of demand for flexible payment options, and banking executives are being forced to respond to the greater need for innovation. In part two of our European banking report, “Can banks innovate fast enough in the wake of COVID-19?” we share the findings of our recent survey of 200 European banking executives and how they’re dealing with the pressure to innovate that has been accelerated by the pandemic. 

COVID-19 has greatly shifted consumer behavior and led to a surge in the adoption of new payment technologies, and banking executives are feeling the pressure to innovate to maintain pace with digital innovators. In order to gain an advantage over rivals, banks are vying to rapidly develop new payment experiences. 

According to the survey, 94% of banking executives say that payments have become a “technology arms race,” and that they can gain competitive advantages over rivals if they offer greater choice and flexibility to consumers. However, 84% of respondents said that they are restricted by legacy infrastructure, which has hindered their ability to innovate at speed and launch new payment solutions that consumers are looking for right now. 

Our European Banking Report had a few clear takeaways regarding the need to innovate and the challenges legacy technology poses for them: 

More than three-quarters of executives surveyed said they have changed their future banking strategies due to COVID-19, but 60% said the lack of flexibility and agility of legacy systems impede their ability to implement new strategies. In the survey, 85% of respondents said it’s frustrating that legacy technology prevents them from moving at the speed required to deliver new payment services, while 22% find it extremely frustrating that they are delayed by legacy payment platform providers. 

Our survey shows that when it comes to payments innovation, these key technology challenges cause the greatest threat: difficulties integrating legacy technology with modern systems (62%), disjointed and siloed payment platforms (55%), and lack of customisation options (46%). Banks also face cultural challenges, including constantly having to address new regulations (66%), unwillingness to take a risk on the unknown (58%), and lack of trust because of a poor previous experience (44%). 

With legacy infrastructure creating additional challenges for banks to deliver new payments services and features, the need to embrace more agile systems continues to grow. The digital era has forced banks to rethink the status quo to innovate quickly.