February 21, 2024

Banks are at a crossroads, caught in a whirlwind of change – technological, regulatory and customer-driven, as consumers demand great service. Fraud is another ever-present enemy. It’s getting more complex and proliferating, with no real solution in sight. Because of these heightened security risks, banks are more vulnerable than ever to security breaches that have the potential to damage their brand and reputation.

With revenue shrinking and the number of failures rising, bank branches must reinvent themselves amid the rapid digitization of the banking industry. Lumen report, Standing Out from the Competition: Building and Securing a Hyperconnected Bankaddressing and providing solutions to challenges in the current retail bank branch environment.

Bank digitization

The pandemic has played a major role in driving rapid changes in the consumer banking industry.

As McKinsey in Reinventing retail banking for the next normal“Retail banking distribution will experience a three-year acceleration in digital preference in 2020.5 In some markets, this could mean 25% fewer branches, and those branches still perform a different set of activities with more flexible work configurations. “

Banks were closed before the pandemic stable speed.according to Data from the Federal Reserve Bank of St. Louis, the number of retail banks has plummeted over the past 10 years. In fact, the most recent data shows that US retail outlets fell from 36 per 100,000 in 2009 to 30.5 per 100,000 in 2009.

Banks continue to close at an alarming rate during the pandemic as customers look to reduce face-to-face interactions and embrace mobile and online banking technology. These trends are driving banks to further adopt mobile and online banking services.

There is no need to declare retail bank branch closures, though. Instead, mobile banking customers still expect to interact with their local branch.

american banker magazine Giving more reasons to boost the agency, it said brick-and-mortar branches play a vital marketing role and remain “the location of choice for many transactions, such as account openings and debit card replacements.”

forbes survey 1 It was found that over 25% of Americans prefer to bank at a local branch. It comes down to two important components: trust and personalization.

So retail bank branches are not dead last, but they do need transformation. To achieve this, banks must fully integrate and deliver a secure customer experience. But how do they get there? It boils down to integrating a platform approach to their current IT and security infrastructure.

Cost and resource constraints prevent banks from implementing the right IT operating model

Rising competition, lower interest rates and tighter regulation have eroded profit margins for most banks. Closing retail banks has been one of many strategies to cut operating costs. However, increasing competition and digitization are also threats that cannot be ignored.

Banks must transform their legacy operations and invest in new infrastructure to help them grow digitally. This comes at a huge cost. It is easy for most organizations to simply provide piecemeal solutions and use specialized solutions to target specific problems. However, the end result is often fragmented and haphazard. Banks hoping to save money could end up spending more to put out the inevitable fires.

For bank branches to achieve maximum profitability, they must choose an all-encompassing IT platform solution that meets the bank’s needs. This all-encompassing solution meets customer needs, maintains compliance, and performs tasks at the lowest possible cost.

IT infrastructure should be outsourced

In the current banking ecosystem, compliance is no longer optional. Compliance and security will work together to meet all regulatory requirements within the industry. To be fully capable of handling the myriad of attacks that could be inflicted on its data, a platform approach can ensure a holistic security strategy is in place.

As mentioned in Lumen’s report: “Banks must implement agile IT infrastructures that support a seamless customer experience, use low-cost channels for transaction flow, and use higher-value channels to serve premium customers. While IT professionals initially IT transformation may be viewed as a cost-saving activity, but long-term benefits include IT and business operational efficiencies, increased enterprise agility, and profitability.”

Outsourcing to a platform provider makes more sense than revamping the internal IT infrastructure. Doing so avoids the risk of a failed implementation and lost time and money due to required updates.

The Lumen report continues: “Working with a trusted partner who can bring an integrated platform brings broad and deep industry expertise. Branch transformation projects require a specific set of skills across networking, compute, and security services, but Banks tend to take on risks and inefficiencies. They are scattered across network providers, computing vendors, software vendors and infrastructure services. But with specialized infrastructure partners, banks can take advantage of a wealth of resources around the latest technologies and best practices diverse expertise while increasing efficiency and reducing operating costs.”

1 Forbes Advisor, Digital Banking Survey: How Americans Prefer BanksFebruary 2022