Digital Transformation for Traditional Banks: Revolutionising the Banking Infrastructure

Digital Transformation for Traditional Banks: Revolutionising the Banking Infrastructure

Not only has FinTech altered traditional banking. It has undergone a revolution to digitally transform banking infrastructure to optimise customer user experience with financial offerings.

Over the past ten years, the rise of tech-first challenger banks, such as Monzo and Starling, have forced established banks to replace their antiquated infrastructure and modernise their offerings quickly.

Present-day incumbent banks deal with clientele with specific expectations, such as easy access to lending, bank statements, and bank transfers. Therefore, if the clients find their expectations have yet to be met, then they are prepared to seek them out from a different bank.

The traditional banks must swiftly and affordably change their financial offerings to meet the constantly shifting needs of their customers, which can only be accomplished through the digital transformation of their banking infrastructure.

As 2023 approaches, traditional banking may be starting to realise their mistake, with most national banks being sufficiently tech-focused to consider themselves as fintech enterprises legitimately.

The incumbent banks have invested a lot of time and money into resolving the numerous old issues of regulations that they must comply with, which caused them to lag behind their competitors.

But it is still a lot of work for traditional banks to become as innovative as the biggest challenger banks in fintech. The challenger banks have been designed to adapt, develop, and integrate by digitally transforming their banking infrastructure.

In the next few years, we expect to see even more mergers and acquisitions in the banking sector as traditional banks attempt to catch up with their fintech rivals. In addition, we may also see some of the largest tech companies, such as Amazon and Facebook, enter the fray with their own digital banking offerings.


Why is digital transformation so significant?

Customers nowadays expect 24/7 online services for everything, from purchasing products on Amazon to watching movies on Netflix, and this expectation has rapidly increased over the past ten years.

Almost every traditional brick-and-mortar industry has been affected by this digital change.

Traditional banking’s lack of innovation initially made room for challenger banks. Now, they must go beyond attempting to look like them and genuinely begin to think like them to defeat them.

They must study the successful challenger banks and adopt their strategies.

Big, traditional banks have the means and the standing to recover losses if they can pull this off. According to a Massachusetts Institute of Technology report, going digital can drastically cut banking costs by 60–80%.

However, customers generally don’t consider who provides them with financial services. In reality, convincing people to use their accounts as primary bank accounts is a significant issue that challenger banks face.

So if traditional banks can use this to their advantage, they will be highly successful amongst their current and future customers.


How does it work?

The traditional banking infrastructure is very outdated because they are using an old model where they rely on closed bank APIs. This means that they are not able to take advantage of the latest technology and innovation that is happening in the banking space.

The banking industry needs to adopt open bank APIs. Open bank APIs will allow the banking industry to build an ecosystem of partners that can offer innovative products and services to their customers. It will permit their infrastructure to add or remove new financial services quickly and easily without affecting the rest of the banking infrastructure system.

This will create a more engaging and convenient experience for customers, increase customer loyalty as well as drive increased revenues for the banks.

The only other option for banks would be to devote a lot of time and money to creating their open-source tools.

The traditional banking model is no longer sustainable and it is time for them to embrace open bank APIs. Otherwise, they will be left behind and they will not be able to compete with the new players in the space.

This digital transformation is the banking infrastructure of the future.


Examples of digital transformation of banking infrastructure:

Starling was Britain’s first digital bank; they offer four different types of current accounts—personal, joint, euro, and teen—and a kids’ debit card called the “Starling Kite” in addition to business banking.

During COVID-19, the bank also unveiled several new features that were created to help customers during the pandemic.

These included mobile check deposits, government-backed lending for small businesses, and its new connected cards for consumers who rely on friends and family to make purchases on their behalf.

Starling has just announced that they are now profitable, showing that their pre-tax profit is £32.1 million in the year ending March 2022, and revenues reached £188 million, an increase of nearly 93% from 2021.

Monzo is another challenger bank that has used digital transformation to its advantage. Their platform offers various banking services with a click of a button on their customer’s mobile phones.

Their use of technology has allowed them to offer greater convenience, transparency and service – at a lower cost than it would be for traditional banks.

In 2020, Monzo had the largest FinTech investment deal of $580 million.

Resulting in Monzo becoming the most popular and used neo-banking app in the UK in the first half of 2022, according to Statista’s Global Consumer Survey.

Monzo has invested heavily in their customer service technology to ensure it delivers a superior experience than a traditional bank. The results prove that challenger banks are meeting customers’ demands.


What are the benefits?

This digital transformation saves banks on overhead and future innovation investment costs.

By reusing components across multiple business units, banks can achieve economies of scale and avoid the need to build duplicate systems.

Increase competition: New entrants can quickly launch new products and services without the need to build their banking infrastructure from scratch.

Resulting in reduced overheads: Banks can save on development and maintenance costs by reusing existing infrastructure and leveraging the expertise of third-party developers.

Ultimately improving customer experience as your customers can benefit from a broader range of banking products and services that are tailored to their needs.

With Orenda Finance infrastructure, it is hassle-free for your business and your customers. You can seamlessly integrate and retrofit any BaaS widget into your offering. Each element is independent, therefore, able to work together to deliver the desired output.

Orenda uses AWS technology to eliminate infrastructure management tasks like capacity provisioning, so you can focus on growing your bank.



Your banking infrastructure is vitally important – by using a structured digitalised banking infrastructure, your business can easily create new financial products and services on your own terms.

For traditional banks to compete with the ever-growing challenger banks sector, they must adopt the infrastructure they use to obtain their customer loyalty.

This will revolutionise and modernise the banking infrastructure and architecture for excellent user experience and delivery.

If you’d like to know more about how Orenda can help with the digital transformation of your banking infrastructure, get in touch.

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