Banks may have been slow to adopt digital technologies compared to other industries, but they are rapidly catching up through a sharper focus on innovation. Increasing demand for speed and simplicity in financial interactions, as well as the need for personalized products and services, are driving fundamental changes in banks’ business and operating models. Banks are also realizing that innovation is the only way to respond to the growing threat posed by Fintech start-ups and non-traditional competitors. According to a Price Waterhouse Coopers survey, 95% of global banking executives believe that they are at risk of losing part of their business to standalone FinTech companies.

So how can you innovate at the speed of Silicon Valley FinTech pioneers and keep up with new age customer expectations? The answer may lie in outsourcing.

In the digital age, the right managed services partner (MSP) can help you achieve goals like cost reduction, operational efficiency, and compliance management while serving as a strategic extension of your business. Large application outsourcing transactions in the banking sector hit a record five-year high in 2015, according to a report by Everest Group. Half of the application outsourcing deals in banking included elements of digital transformation such as mobility, Big Data, cloud, social media, artificial intelligence, or blockchain.

Why should banks outsource to innovate?

External service providers bring in the expertise, best practices, scale, flexibility and technological capabilities necessary to accelerate innovation and support your digital transformation initiatives. They also enable access to cloud-based infrastructure and cutting-edge talent pool, to drive large transformational projects. Here are some of the areas where outsourcing can help you innovate and gain a competitive edge:

Mobile solutions:Mobile banking is the most valuable area of innovation when it comes to consumers, according to Bank Innovation’s 2016 State of Banking Innovation survey. External suppliers can play an important role in deploying robust technology platforms for faster and more flexible implementation of mobile solutions. An added advantage would be an ecosystem of mobility partners as well as tools and enablers, which can be used to develop sophisticated mobile wallets or digital payment solutions.

Multi-channel integration:Integrating digital and social channels with traditional channels is necessary for delivering a seamless, personalized customer experience. Outsourcing can be used to gain cross-channel process efficiencies through automation and digitization.

Analytics and Big data: Experienced service providers typically offer analytics solutions across the value chain - from data management, reporting and descriptive analytics to predictive modeling and optimization. You can also aggregate and consolidate mobile, online and branch data into a single source to generate more powerful customer insights. In addition, real-time, predictive analytics improves decision-making with respect to regulatory compliance, fraud detection, and risk management.

Collaborate to innovate: Choose the right outsourcing partner

Outsourcing will be the key to banking success in an always-on digital future. However, innovation-driven transformation requires the right partner and an outcome-based engagement model. Deutsche Bank has already opened three tech innovation labs in Silicon Valley, Berlin, and London - in partnership with IBM, Microsoft and HCL Technologies respectively. The three innovation labs are an important digital element of the bank’s Strategy 2020. It’s clear that banks that leverage collaborative innovation will be well positioned to enhance their bottom line and strengthen customer relationships; and those that don’t – might risk losing market share.