About 70% of digital transformation projects carried out by mid- to large-sized banks in the Asia-Pacific region have failed due to costly and lengthy in-house efforts, according to a report released by engagement banking fintech firm Backbase.
The APAC-focused IDC InfoBrief, dubbed “Accelerating Customer-Centric Transformation by Balancing Build and Buy – A Collaborative Approach Towards Sustainable Digital Banking Architecture,” draws insights from 125 banks and 316 CIOs in the region.
It finds that despite 65% of banks opting to build their platforms in-house, 80% of these platforms, with budgets over $10 million, face underperformance and have not yielded the desired ROE in their digital initiatives.
Ashish Kakar, Research Director, Financial Insights, IDC Asia/Pacific, highlighted the complexities involved in supporting legacy and modern systems, managing and orchestrating extensive data layers, channels, and features as the reasons for in-house implementation failure.
Kakar said:
Building in-house has been a de-facto strategy by banks, but it’s no longer feasible to deliver to the pace and scale that is required to be competitive. The complexities that come with the extensive amount of data layers, channels, features, upstream and downstream integration that needs to support legacy and modern systems to manage and orchestrate sophisticatedly is where in-house implementation breaks apart.
The report also highlights a crucial disconnect between banks and their customers, leading to challenges in accessing multiple services, lack of unified view of portfolios, lengthy onboarding processes, and absence of personalized experiences.
The IDC InfoBrief suggests that the “Adopt and Build” approach is a pragmatic solution for banks to accelerate their go-to-market efforts and differentiate where it matters, instead of reinventing the wheel by building from scratch.
This approach can achieve 40% faster time-to-market and is 2.3 times more cost-effective than the traditional in-house “build” option, the report added.
Despite these setbacks, over 150 forward-looking banks, including Techcombank, BDO, HDFC, ABBANK, and OCB, have adopted Backbase’s Engagement Banking Platform to prioritize innovative digital customer engagement and experiences.
Riddhi Dutta, Regional Vice President, Asia of Backbase, explained that a true platform comes with all the hygiene requirements, such as market fit, security, regulatory compliance, versatility, and customizability, to support each bank’s unique customer needs.