Global Third-Party Banking Software Market By Product Type (Core Banking Software, Omni channel Banking Software, Business Intelligence Software, Wealth Management Software, Others), By Deployment (On-premise, Cloud), By Application (Risk Management, Information Security, Business Intelligence), By End-use (Commercial Banks, Retail Banks), Region and Companies – Industry Segment Outlook, Market Assessment, Competition Scenario, Trends and Forecast 2024-2033

Report Overview

The Global Third-Party Banking Software Market size is expected to be worth around USD 59.6 Billion By 2033, from USD 27.2 Billion in 2023, growing at a CAGR of 8.2% during the forecast period from 2024 to 2033.

Third-party banking software refers to software solutions developed by external companies or vendors that provide various services and functionalities to banks and financial institutions. These software solutions are designed to enhance and streamline banking operations, improve customer experience, and enable efficient management of financial transactions.

The market for third-party banking software has been growing as financial institutions seek to modernize their services and improve customer experiences without the high costs and complexities of developing their own software solutions. This market is driven by the increasing demand for efficient banking operations, enhanced security measures, and better compliance with financial regulations.

Additionally, the rise of digital banking trends and the need for customizable and scalable banking solutions also contribute significantly to the growth of this market. As banks continue to focus on digital transformation, the reliance on third-party banking software is expected to increase, offering substantial opportunities for software providers.

Banks choose third-party banking software because it offers several advantages. It saves them time and money by providing ready-made solutions instead of building everything from scratch. It also enables banks to access specialized expertise and innovative features that may not be available internally. Additionally, these software solutions can be easily integrated into the existing banking infrastructure, allowing banks to leverage their existing systems while adding new capabilities.

The third-party banking software market is highly competitive, with numerous vendors vying for market share. Some prominent players in this market include established software companies as well as emerging fintech startups. The market dynamics are influenced by factors such as technological advancements, regulatory changes, customer demands, and industry trends.

For instance, in June 2022, Temenos AG, a major software company, announced that TS Banking Group, a banking organization based in the U.S., had decided to use their services on the Temenos Banking Cloud for a complete digital transformation. TS Banking Group plans to transfer all its banking operations to this advanced platform from Temenos, which is specially designed for flexible and modular banking solutions. This move will enable TS Banking Group to expand and adapt more efficiently, thanks to the capabilities of the Temenos Banking Cloud.

Key Takeaways

• Third-Party Banking Software Market size is expected to reach USD 59.6 billion by 2033, projected at a CAGR of 8.2% during forecast period.
• In 2023, the core banking software segment held a dominant market position, capturing more than a 31.5% share of the third-party banking software market.
• In 2023, the On-premise segment held a dominant market position within the third-party banking software market, capturing more than a 58% share.
• In 2023, the Risk Management segment held a dominant market position in the third-party banking software market, capturing more than a 41% share.
• In 2023, the Retail Banks segment held a dominant market position in the third-party banking software market, capturing more than a 63% share.
• In 2023, North America held a dominant market position in the third-party banking software market, capturing more than a 32% share.

Product Type Analysis

In 2023, the core banking software segment held a dominant market position, capturing more than a 31.5% share of the third-party banking software market. This leading position can be attributed primarily to the increasing need for efficient, scalable, and integrated banking operations across the financial sector.

Core banking software simplifies and streamlines the fundamental banking operations such as account transactions, account management, loans, and mortgages, thereby enabling banks to deliver improved customer service and operational efficiencies. The growth of the core banking software segment is further driven by the rising adoption of digital banking solutions worldwide.

As financial institutions focus on enhancing customer experiences and expanding their digital services, core banking platforms have become integral for managing the complex array of banking products and services. This software supports banks in achieving a seamless integration of new technologies with existing banking infrastructure, which is crucial for maintaining competitiveness in the rapidly evolving banking landscape.

Additionally, the surge in regulatory compliance requirements has compelled banks to adopt robust core banking solutions that ensure compliance with evolving financial regulations and standards. These platforms provide the necessary tools to manage risks and comply with regulations efficiently, further contributing to their widespread adoption. As banks continue to navigate the challenges of digital transformation and regulatory compliance, the demand for core banking software is expected to remain robust, reinforcing its leading position in the market.

Deployment Analysis

In 2023, the On-premise segment held a dominant market position within the third-party banking software market, capturing more than a 58% share. This segment’s prominence can be attributed to several key factors that align with the intrinsic needs and operational preferences of many financial institutions.

Primarily, on-premise solutions offer enhanced control over security protocols and data management, crucial in the banking sector, which is highly sensitive to data breaches and security threats. Banks and financial institutions prioritize on-premise software to maintain stringent control over their IT infrastructure, ensuring compliance with regulatory requirements and internal policies.

Moreover, the on-premise deployment allows banks to customize software applications according to specific operational needs and integrate them seamlessly with existing legacy systems. This customization is less feasible with cloud-based solutions due to their standardized architecture across clients.

Additionally, on-premise solutions often entail a one-time licensing fee, which can be economically advantageous in the long term compared to the recurring costs associated with cloud services. This economic consideration, coupled with a higher degree of customization and control, solidifies the on-premise segment’s leadership in the market.

Despite the growing traction of cloud deployments, which are celebrated for their scalability and minimal upfront investment, the on-premise segment continues to lead due to its alignment with the critical requirements of established banking institutions. These institutions often have extensive data and require robust systems that can handle large volumes of transactions securely and efficiently.

Application Analysis

In 2023, the Risk Management segment held a dominant market position in the third-party banking software market, capturing more than a 41% share. This leading status is primarily driven by the escalating complexity and volume of financial regulations, which compel banks and financial institutions to enhance their risk management capabilities.

As these entities face increasing scrutiny from regulators and stakeholders, the demand for robust software that can effectively manage credit, market, and operational risks has surged. Third-party banking software dedicated to risk management supports these institutions in identifying, assessing, and mitigating risks, ensuring compliance with evolving regulatory frameworks.

Furthermore, the integration of advanced analytics and machine learning technologies into risk management software has significantly improved the predictive capabilities of these tools, enabling banks to foresee potential risks and adapt their strategies proactively.

This technological advancement has made risk management software even more indispensable for modern banking operations, which operate in a highly dynamic and uncertain financial environment. The ability of these tools to provide comprehensive, real-time insights into various risk factors substantially contributes to their widespread adoption.

The continued focus on financial security and risk assessment, heightened by recent financial crises and fraud incidents, ensures that the Risk Management segment remains at the forefront of the third-party banking software market. Moving forward, as banks increasingly prioritize digital transformation and data-driven decision-making, the role of sophisticated risk management solutions in ensuring operational resilience and regulatory compliance is expected to keep this segment in a leading position.

End-use Analysis

In 2023, the Retail Banks segment held a dominant market position in the third-party banking software market, capturing more than a 63% share. This significant market share is largely due to the heightened need among retail banks to enhance customer service and operational efficiency through digital solutions.

As retail banking directly interacts with consumers, there is a continuous push towards adopting technologies that streamline processes and improve the customer experience. Third-party banking software facilitates numerous functions such as account management, transaction processing, and customer relationship management, all of which are crucial for maintaining competitive edges in a consumer-centric market.

Moreover, the adoption of third-party banking software by retail banks supports their strategic shift towards omnichannel banking, which integrates physical and digital banking experiences to offer services anytime and anywhere. This software helps retail banks deploy innovative features like mobile banking, online banking, and automated teller services, which are critical in attracting and retaining tech-savvy consumers.

The push for enhanced digital services has become even more pronounced in the wake of the COVID-19 pandemic, which accelerated digital transformation across the banking sector. Additionally, third-party software solutions enable retail banks to implement advanced security measures and comply with stringent data protection regulations, further driving their adoption.

As retail banks handle a large volume of personal and sensitive customer data, ensuring robust security and compliance is paramount. The ongoing need to innovate securely and cost-effectively will continue to propel the Retail Banks segment’s dominance in the third-party banking software market.

Key Market Segments

By Product Type

• Core Banking Software
• Omni channel Banking Software
• Business Intelligence Software
• Wealth Management Software
• Others

By Deployment

• On-premise
• Cloud

By Application

• Risk Management
• Information Security
• Business Intelligence

By End-use

• Commercial Banks
• Retail Banks

Driver

Increasing Demand for Digital Banking Services

The increasing demand for digital banking services is a major driver in the third-party banking software market. As consumers shift towards online and mobile banking solutions, financial institutions are compelled to enhance their digital offerings to meet customer expectations. This trend is amplified by the growing penetration of smartphones and internet services, making digital banking more accessible to a larger population.

The need for efficient, user-friendly, and secure banking platforms drives banks to invest in advanced software solutions that can support a wide array of banking activities, from digital payments to remote account management, thereby fueling the growth of the third-party banking software market.

Restraint

Concerns Over Data Security and Privacy

Data security and privacy concerns pose significant restraints on the growth of the third-party banking software market. Financial institutions handle sensitive information, making them prime targets for cyberattacks. The reliance on third-party vendors for critical banking functions intensifies these risks, as data breaches can lead to severe reputational and financial damages.

Additionally, the complexity of integrating third-party software with existing banking systems while ensuring data protection complicates their adoption. Regulatory requirements for data protection also vary by region, adding further compliance challenges that can deter banks from rapidly adopting new third-party software solutions.

Opportunity

Advancements in Artificial Intelligence and Machine Learning

The integration of artificial intelligence (AI) and machine learning (ML) in third-party banking software presents significant opportunities. These technologies can revolutionize how banks operate, offering smarter risk management, personalized customer service, and enhanced operational efficiency. AI-driven analytics can help banks better understand customer behaviors and preferences, leading to more targeted and effective services.

Moreover, AI and ML can automate complex, time-consuming processes, allowing banks to reduce costs and improve accuracy. As these technologies continue to advance, their adoption in banking software can significantly enhance competitive advantages and open new avenues for market growth.

Challenge

Integration with Legacy Systems

A major challenge in the adoption of third-party banking software is the integration with existing legacy systems. Many banks operate on outdated technology platforms that are not readily compatible with modern software solutions. Upgrading these systems to integrate with new software can be costly and time-consuming.

Additionally, these legacy systems often support a range of critical banking functions, making the stakes of integration failures high. The need for seamless integration without disrupting ongoing operations or risking data integrity poses a significant challenge for banks, potentially slowing down the adoption of innovative third-party solutions.

Growth Factors

• Digital Transformation Initiatives: Many banks are undergoing digital transformations to meet customer expectations for seamless digital services. This trend drives the adoption of third-party banking software, which supports diverse digital banking functionalities such as mobile banking, online transactions, and personalized customer engagement.
• Regulatory Compliance Needs: As financial regulations become more stringent, banks are increasingly relying on third-party software to ensure compliance. Software solutions that can manage and report on compliance with local and global financial regulations are in high demand.
• Increase in Financial Inclusion Efforts: Efforts to increase financial inclusion involve reaching underserved or unbanked populations, often through digital banking solutions. Third-party software facilitates these efforts by providing scalable platforms that can handle increased transaction volumes and diverse customer needs.
• Cybersecurity Enhancements: With the rise in cyber threats, banks are investing in third-party banking software that offers advanced security measures to protect sensitive data and prevent financial fraud.
• Cost Reduction and Operational Efficiency: Third-party software helps banks reduce costs by automating routine tasks and improving operational efficiencies. By outsourcing complex software development and maintenance, banks can focus on core business activities and customer service.

Emerging Trends

• Cloud-Based Solutions: The shift towards cloud-based banking software is gaining momentum. Cloud platforms offer scalability, reduced operational costs, and enhanced flexibility, making them attractive for banks looking to innovate quickly and efficiently.
• Blockchain Technology: Blockchain is becoming increasingly relevant in banking for its ability to ensure transparency and security, particularly in transactions and compliance. Third-party software integrating blockchain technology is set to reshape banking processes and trust mechanisms.
• AI-Powered Analytics: The use of AI in banking software to analyze customer data and provide insights is trending. AI capabilities enable personalized banking experiences and smarter decision-making, driving customer satisfaction and loyalty.
• Open Banking APIs: As open banking regulations encourage the sharing of data between financial institutions and third-party providers, the development of APIs that facilitate this sharing is crucial. This trend allows for more integrated and innovative services, benefiting consumers and financial ecosystems alike.
• Sustainability and Social Responsibility: There is a growing focus on sustainability within the banking sector. Third-party software that can help banks measure, report, and reduce their carbon footprint, and manage investments in a socially responsible way, is increasingly in demand.

Regional Analysis

In 2023, North America held a dominant market position in the third-party banking software market, capturing more than a 32% share. This leadership can be attributed to the region’s advanced financial infrastructure and the early adoption of digital banking technologies. The demand for Third-Party Banking Software in North America was valued at USD 8.7 billion in 2023 and is anticipated to grow significantly in the forecast period.

North American banks have historically been at the forefront of embracing innovative solutions to enhance operational efficiencies and customer service, which has driven the integration of third-party software across its banking systems. The presence of major banking software developers in the region also supports rapid deployment and integration of these solutions.

Additionally, the stringent regulatory landscape in North America necessitates robust banking systems that can ensure compliance with a complex array of financial regulations. Third-party banking software helps institutions navigate this regulatory environment more effectively, reducing the risk of non-compliance penalties while improving risk management. The growing focus on cybersecurity in the wake of increasing cyber threats within the financial sector further propels the demand for secure and reliable banking software solutions in this region.

Moreover, the trend towards personalized banking experiences in North America has spurred the adoption of data-driven banking services enabled by third-party software. These tools help banks leverage big data analytics and artificial intelligence to provide tailored services and predict customer needs, enhancing the overall customer experience. As the banking landscape continues to evolve, driven by technological advancements and changing consumer expectations, North America is expected to maintain its leading position in the third-party banking software market.

Key Regions and Countries

• North America
  • US
  • Canada
• Europe
  • Germany
  • France
  • The UK
  • Spain
  • Italy
  • Russia
  • Netherlands
  • Rest of Europe
• Asia Pacific
  • China
  • Japan
  • South Korea
  • India
  • Australia
  • Singapore
  • Thailand
  • Vietnam
  • Rest of APAC
• Latin America
  • Brazil
  • Mexico
  • Rest of Latin America
• Middle East & Africa
  • South Africa
  • Saudi Arabia
  • UAE
  • Rest of MEA

Key Players Analysis

The third-party banking software market boasts a diverse range of key players, each contributing their unique expertise and offerings to the industry. Accenture, a leading global professional services company, provides comprehensive banking solutions that help institutions drive digital transformation and enhance customer experiences. Capgemini offers a wide array of banking software services, including core banking systems, digital banking platforms, and risk management solutions.

Deltek specializes in financial management software, catering to the specific needs of banking institutions. IBM delivers cutting-edge banking software solutions, leveraging artificial intelligence and analytics to improve operational efficiency and enable personalized customer experiences. Infosys, a global IT services company, offers a suite of banking software solutions that empower institutions with advanced capabilities in core banking, digital banking, and customer engagement.

Top Key Players in the Market

• Accenture
• Capgemini
• Deltek
• IBM
• Infosys
• Microsoft Corporation
• NetSuite Inc.
• Oracle Corporation
• SAP SE
• Tata Consultancy Services
• Other key players

Recent Developments

• SAP announced a partnership with Deutsche Bank in February 2024 to co-develop a cloud-based financial services data platform aimed at enhancing real-time data processing and reporting for banking clients.
• IBM completed the acquisition of Apptio Inc., a leader in financial and operational IT management and optimization software, on August 10, 2023. This acquisition, valued at $4.6 billion, was initially announced on June 26, 2023. It aims to enhance IBM’s IT automation capabilities, integrating Apptio’s technology to provide actionable financial and operational insights across enterprise IT.
• In September 2023, NetSuite released updates to its ERP software to include new financial management capabilities specifically designed for mid-market banks, enabling better financial planning and analysis.
• Oracle launched its next-generation cloud-based core banking platform in November 2023, which integrates advanced analytics and machine learning to optimize banking operations and customer service.

Report Scope