Very few financial institutions -- just 14 per cent -- believe they are innovation pioneers.

Digital transformation has a long way to go as only 17 per cent of banks globally have succeeded in digitally transforming at scale, according to a new report released on Thursday by Infosys Finacle and non-profit organisation Efma.

Legacy technology and system integration challenges are perceived as the biggest barriers to digital transformation, followed by time and cost required to bring concept to reality, said the report titled ''Innovation in Retail Banking.''

More than 350 banks and financial services companies globally took part in the report authored by Jim Marous, publisher of the Digital Banking Report and co-publisher of The Financial Brand.

It said majority of banks are not confident about how digital transformation has successfully impacted their organisational objectives. Only 39 per cent of banks believe their digital transformation strategy has had high or very high impact in accelerating product and service delivery and 33 per cent say it has helped enhance innovation processes.

Very few financial institutions -- just 14 per cent -- believe they are innovation pioneers. Nearly 51 per cent admit to being mainstream or lagging in innovation, said the report.

While banks expect mobility, advanced analytics and open banking application programming interfaces (APIs) to impact their business the most in the coming year, most are not ready to apply these technologies to create expected business outcomes.

Results from the study suggest that in the next five years, the biggest threat to banking industry will be from large technology companies, fintech startups and challenger banks. More than 75 per cent of banks think that consumer technology giants and fintech firms will leadbanking innovation.

At the same time, customer experience is expected to see the maximum evolution over the next three years.

"Banks will need to transform culture, organisation design, operations and technology ecosystem," said Sanat Rao, Chief Business Officer and Global Head at Infosys Finacle. "The secret sauce lies in doing all of this successfully and simultaneously."

However, said Efma Chief Executive Officer Vincent Bastid, all players in the industry -- whether it be banks, fintech start-ups, or technology companies -- understand that in the midst of increasing digital transformation in financial services, placing the customer experience at the centre is critical to success.

Infosys Finacle is part of EdgeVerve Systems, a wholly-owned subsidiary of Infosys. Efma was established in 1971 by banks and insurance companies to facilitate networking between decision-makers.