Amidst a high interest rate environment, 70 per cent of banks have seen the total value of their balance sheet grow in the past 12 months, leading to 77 per cent feeling increased pressure to innovate to better meet customer needs and provide them with relevant banking products at pace.
These findings come from data-driven core banking engine, SaaScada, which has unveiled its latest report: Boosting Net Interest Margins: Why Banks Must Not Wait To Innovate, revealing UK banks’ ongoing struggles to understand customer needs.
The report analyses data from a survey of 150 heads of innovation at UK retail and business banks revealing that banks are facing increased pressure to innovate and grow their profitability. Seventy-six per cent of banking innovation heads say it’s ‘very important’ or ‘critical’ to increase the number of banking products or services that each customer buys from them. However, just 23 per cent of banks’ customers are using more than one of their products.
So what’s causing this issue? SaaScada says banks struggle to understand their customers’ needs and sell new, relevant products to them. In fact, 90 per cent of banking innovation heads agree this is true and need to improve this to better to stay ahead of competitors – but many often fail to follow the data.
Nelson Wootton, CEO and co-founder of SaaScada
“Right now, UK banks are under immense pressure to balance the opposing levers of growth and profitability,” explained Nelson Wootton, CEO and co-founder of SaaScada. “To increase their net interest margins, banks should tap into the treasure trove of customer data they have access to. This data reveals spending habits and challenges, but is currently slipping through banks’ fingers. By getting a handle on their data, banks can better understand customer needs, and launch lucrative and innovative products to address them. If not, they will find themselves left out in the cold.”
SaaScada warns that banks that can’t launch new products at speed to grow profitability will likely see their net interest margins shrink.
Plagued by setbacks
Overall, 75 per cent of respondents agree that to survive, banks need to launch products in months not years. Yet it takes an average of 8.4 months to launch a new product, with 45 per cent of banking innovation heads saying by the time they launch new banking products, they are already outdated.
The banking industry continues to be hit by numerous setbacks. Fifty-one per cent have experienced delays in launching a new product in the last 12 months, with an average delay of at least three months. Delays caused affected respondents to lose out on a total of £51.1million in missed revenue in the last year.
The other challenges banks are grappling with are:
The fact that delays waste time, money, and resources (66 per cent)
Many respondents were called in front of the board or leadership to explain the issue (66 per cent)
Having to scrap or delay other projects (64 per cent)
Past delays attracted increased regulatory scrutiny (51 per cent)
“Banks must focus on improving their agility to avoid lengthy, costly product delays,” concluded Wootton. “To meet this goal, banks need to assess their core banking systems, and gauge whether these are agile enough to develop new products and services at pace. Truly cloud-native core banking platforms are the only way banks can bake insights and flexibility into their product offerings. Without this capability, banks will fall behind the competition and fail to keep up with soaring customer expectations.”
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