#Africa Why banks need digital startups

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By the end of 2019, 25 per cent of retail banks will use startup providers to replace legacy online and mobile banking systems.

This is according to research and analysis firm Gartner, which says banks are facing intense pressure to increase efficiencies and reduce costs while delivering next-generation digital services, yet have been slow to respond to new requirements.

New startups are emerging to meet both customer and bank needs for channel integration and dynamic customer experiences, challenging the traditional banks.

“Startups and emerging providers of digital banking platforms offer banks interesting opportunities for innovation,” said Stessa Cohen, research director at Gartner.

“However, CIOs must prepare to manage the challenges of evaluating and selecting new vendors that may not have proven track records in the financial services vertical or may simply be new and untried without an extensive customer base. It can be difficult for CIOs to justify investment in their solutions to their boards and regulatory agencies, but don’t use that as a reason to exclude new vendors.”

According to Gartner, bank CIOs should work with business leaders and other key stakeholders to assess the bank’s comfort with, and ability to manage, the risks associated with using new providers, especially financial technology startups. This is a process that is already happening in Africa.

One of the main reasons the market for digital banking solutions has opened up is that most legacy vendors offering bank channel applications for both consumer and business customers have been slow to react to new customer requirements and demands of digital banking.

These incumbents often do not support open architectures that decouple the presentation of services from the services and transactions themselves and enable banks to bring new and existing processes together to offer innovative digital services.

“This is why many banks developing digital banking strategies to meet customer demands have sought out new providers to replace their existing online and mobile banking solutions with digital banking platforms,” said Cohen.

The post Why banks need digital startups appeared first on Disrupt Africa.

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