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Traditional banks must modernise their entire tech stack, from card management to backend systems, to stay competitive with fintechs and meet evolving consumer expectations.
How can traditional banks survive and thrive in a world dominated by fintech challengers and shifting consumer expectations? Digital transformation has been a game-changer for banks, driving commercial success, improving client support, and boosting customer retention. Yet, achieving this transformation is far from simple—it demands a strategic overhaul of the entire tech stack, from customer-facing applications to backend processing systems.
In the highly competitive EU market, where rivalry is intense and the pace of fintech innovation is unceasing, banks must embrace modern solutions to remain pertinent. As of 2023, Europe is home to nearly ten thousand fintechs, showcasing a vibrant ecosystem challenging traditional banking norms. In contrast, over six thousand traditional banks are operating in Europe, many of which are feeling the pressure to modernise. With the emergence of new fintech companies, scalable and adaptable card management platforms have become crucial for traditional banks. Outdated payment systems are insufficient to support the rapid, digital-centric strategies banks now require to flourish.
What makes the modernisation of card issuing an attractive step?
Modern card issuing and processing systems offer more than agility—they deliver scalability, faster time to market, and the ability to handle evolving customer demands. EU banks are particularly aware of this, as they must handle enormous payments. According to the European Central Bank, over 126 billion cashless transactions were processed in the EU in 2022, a significant increase from previous years. Moreover, with 95% of all purchases will be made online by 2040, the demand for seamless digital payment experiences is only expected to grow.
The software as a service market is booming, with Statista projecting to reach over US$197.00 billion in 2029. In Europe alone, the SaaS market is experiencing double-digit annual growth. Banks increasingly turn to SaaS-based platforms, which provide more control over operations, enhanced security, and flexible scaling as payment volumes grow. In a world where payment preferences constantly shift, digital transformation is no longer an option—it’s a necessity.
Many people often mistake digital transformation in banking for simply introducing customer-facing technologies like mobile apps and chatbots. While these developments are important, they are merely the visible portion of a much deeper and more complex process. Authentic digital transformation demands a complete revamp of the entire technological infrastructure, including core banking systems and backend processing platforms.
Neglecting the backend infrastructure can lead to fragmented systems that fail to deliver the seamless and efficient user experience customers expect. Imagine a sleek mobile app that falters because the underlying systems can’t handle transactions swiftly or securely. To avoid such pitfalls, banks must prioritise a top-to-bottom modernisation, ensuring that every layer of their technology stack is agile, scalable, and robust.
Security is the key
Emphasising digital transformation throughout the technology stack substantially boosts operational efficiency. Obsolete legacy systems, often laden with manual processes and fragmented data silos, need to be replaced with integrated platforms that automate workflows and provide real-time data access. This transition speeds up transaction processing, cuts operational costs, and reduces the likelihood of errors. Additionally, outsourcing fraud management as a service reduces costs for the financial institution and ensures that databases, rules, and learning models are always up to date. This allows banks to allocate resources to what truly matters for the business—growth.
What are the benefits of cloud management as a service (CMaaS)?
The realm of card issuing and processing vividly illustrates the necessity of a comprehensive digital transformation. Traditional card issuing processes, bogged down by manual steps and outdated systems, are ripe for disruption. Digital transformation in this area means automating the entire lifecycle of card management—from application and approval to issuance and transaction processing.
Modern card management platforms handle vast data volumes, offer real-time analytics, and integrate seamlessly with other banking systems. This expedites the issuance process and enables banks to offer personalised services. For instance, AI-powered customer support can provide instant assistance, enhancing customer satisfaction. Advanced onboarding mechanisms streamline the customer journey, reducing friction and increasing conversion rates. Sophisticated credit-scoring algorithms allow for more accurate risk assessment, enabling banks to extend credit responsibly and efficiently.
Enhanced processing systems translate to faster payments, immediate customer account updates, and superior fraud detection powered by AI and machine learning. These modern solutions benefit users and issuers by providing a more secure, efficient, personalised banking experience.
The rise of white-labelled solutions offers institutions greater control and flexibility, allowing banks and fintechs to brand their services while benefiting from robust, scalable infrastructure without needing in-house development. These solutions empower organisations to manage the entire card lifecycle, from issuance to compliance, with minimal operational overhead. By adopting such platforms, institutions can deliver tailored card solutions, improve customer experiences, and scale effortlessly, all while maintaining a secure and compliant environment. The move to cloud CMaaS also reduces dependency on legacy systems, providing a modernised, future-proof approach to card management.
The time is now
For banks, the time to invest in digital transformation is now, and this journey must begin with a thorough assessment of current systems to identify critical pain points and develop a clear transformation roadmap. Upgrading systems to modern, cloud-based platforms provide the flexibility, scalability, and real-time capabilities necessary in today’s fast-paced market. Implementing advanced data management solutions enables seamless data integration and real-time analytics and ensures regulatory compliance. Enhancing cybersecurity infrastructure is essential to protect against evolving threats and to safeguard sensitive data. Additionally, investing in open APIs and modern card management platforms that streamline and automate the entire card lifecycle will significantly improve operational efficiency and customer experience, incorporating AI-powered customer support, advanced onboarding mechanisms, and sophisticated credit-scoring systems to enhance user engagement and satisfaction.
Banks that delay their digital transformation efforts do so at their peril. Fintech companies, unburdened by legacy systems, quickly capture market share by putting the customer at the centre of their digital strategies. These innovators are not just offering new services but redefining customer expectations in the financial sector.
To remain competitive, banks must embrace digital transformation across their entire tech stack, ensuring they can offer the seamless, efficient, and secure services that today’s customers demand. The stakes are high, and the time to act is now. By prioritising digital transformation, banks can secure their market position and continue to thrive in a digital-first world.