When looking to buy off-the-shelf banking capabilities such as core banking and digital banking, technology teams in banks need insight into the software’s functional breadth, depth, technology, and roadmap. However, to make the best possible decision, they also need to know which vendor their peers preferred for a given business functionality and what the vendors’ current market position is globally, regionally, or in the bank’s own country. These factors will help a bank to determine the solution’s quality, its ability to meet local requirements, or the likelihood that a vendor will leave their market.
To provide this information, for more than a decade now, Forrester has surveyed banking platform vendors about their deals. The latest survey, Forrester’s Global Banking Platform Deals Survey, 2022, has revealed key market trends, including:
- Market consolidation accelerated. The banking platform market did not grow overall, but the top five vendors increased their market share further and jointly reached close to 60%. Some formerly international vendors turned into regional players with a stronghold in Asia Pacific, for example. Others, like Azentio, expanded their footprint via acquisitions.
- Transactional and processing capabilities moved back to center stage. In 2021, the number of contracts with transactional capabilities like core banking and payment processing more than doubled. This indicates banks’ strong interest in modern, flexible, and fast processing platforms. It also shows that when it comes to digital engagement platforms, banks prefer custom-built solutions or those from pure-play vendors.
- New-school vendors strengthened further. New-school vendors such as 10x Banking, Five Degrees, Mambu, Ohpen, Thought Machine, and Vilja Solutions demonstrated the success of their lean core solutions in this survey: Some quadrupled their deal numbers. Mambu is one of the five vendors that won the most new customers. This indicates banks’ interest in agile lean core banking solutions that enable a quick transformation and drive success in banking ecosystems.
Five Key Insights To Help Banks Navigate This Tech Landscape
Technology teams tasked with selecting best-suited engagement and processing capabilities for their bank should keep in mind that:
- New-school vendors offer lean cores, but typically no more than that. The lean core focuses on data availability, consistency, and processing. It supports position-keeping, accounting, and rules, for example. The solutions of new school vendors typically don’t yet offer the functional breadth of the incumbents’ banking platforms. They use partnerships to deliver functionally broader banking platforms instead, but some have worked on enhancing their banking platform’s functionality.
- Incumbents with modern solutions will deliver lean cores. Forward-looking incumbents have started moving toward lean cores but need time to bring their rich functionality to the new architecture and allow their installed base to catch up.
- Incumbents’ traditional core banking solutions can be an option for some banks. The solution will work as expected and likely at a very reasonable price point. However, the bank should not expect to easily capitalize on future business models because traditional core banking solutions don’t build on architectural concepts and elements, such as decoupling and APIs.
- The consolidating market will help banks negotiate better deals … Market dynamics can help buyers negotiate more attractive prices — with new-school vendors and even more so from incumbents.
- … but will also increase vendor and product risk. Organic growth has reached its limits for many banking platform vendors. Banks should expect more acquisitions and for some vendors to leave this space altogether — and thus uncertainty about the future of one of the most essential sets of banking applications.
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