Dive Brief:
- Outdated technology is causing banks to lose customers, according to a survey from consulting firm Baringa published Monday. The company surveyed 4,000 U.S. and U.K. residents with bank accounts and 400 U.S. and U.K. bank leaders about the digital customer experience.
- Legacy technology architecture slowed modernization and hurt customers’ digital experiences, according to 68% of IT leaders and banking executives. Meanwhile, 62% of customers switched or have considered switching banks to find a better digital experience and product from their bank.
- Two-thirds of bank leaders estimated that some of their oldest programming code was written prior to 2000. Nearly one-third of banks' oldest technology infrastructure — including systems such as payments and transaction processing or call center support — dated back to the 1960s or earlier.
Dive Insight:
Lagging modernization in core IT systems can hinder banks’ ability to differentiate their products and services, threatening their ability to retain customers and respond to digital demands.
Four in five consumers between the ages of 18 and 54 are comfortable with having an exclusively digital relationship with their bank, according to the Baringa survey. Despite the rise in new technologies facilitating more personalized customer experiences, such as generative AI and AI agents, many bank leaders hesitate to invest due to concerns about how emerging technologies are constantly evolving, David McGibbon, a partner at Baringa, shared in the survey announcement.
However, old technologies pose risks bank IT leaders must address that not only solve technical problems but improve how customers interact with their banks online, he said. Banks must find ways to improve their online digital experiences to retain customers in the modern era, including strategic investments in new technologies to minimize risks posed by older IT systems.
"Doing so won’t just solve a technical problem, but the smoother working of the business and the greater customer experience this allows will build customer satisfaction and loyalty, increasing the bank’s performance in all areas," he said.
The banking industry has spent more than $2.8 trillion since 2011 to make products digital, Steve Smith, managing director and lead of strategy and consulting for banking in the southern U.S. at Accenture, shared with CIO Dive.
That broad effort to modernize has created a "sea of sameness," he said.
"Customers effectively feel that Bank A is no different than Bank B, is no different than Bank C," Smith said. Banking executives are struggling to create new experiences that help their business stand out in a crowded market, according to Smith.
Banks are struggling to pull insightful data from core IT systems in real time to create more personalized customer experiences. Yet as bank executives invest in new technologies to enable greater personalization, they're often held back by regulatory, risk and compliance concerns, he added.
"What ends up happening is you get a fairly watered-down impact, because you're hamstrung in terms of where you're actually able to test, learn, grow and scale," Smith said.
For bank executives to win in the era of personalization, executives will need the right technical capabilities to remember and reward customers across the full relationship instead of through individual products, Smith said. That means turning to new tools like generative AI and large language models.
Larger banks are ramping up investment in generative AI capabilities. New technology use cases launched by the 50 biggest financial firms globally doubled from the last half of 2024, according to Evident Insights data. Nine out of the 50 firms documented using AI agents in pilot projects.
To strengthen customer retention, executives should differentiate services, define technology needed to meet customer expectations and embrace a multiyear technology shift, according to the Baringa survey.
