Monica Woodley, Editorial Director at the Economist Intelligence Unit.
London – Almost half of retail banks worldwide believe that the fintech revolution will bring an end to branch-based banking and the majority predict that retail banking will become fully automated within five years, according to an in-depth study released today by Temenos.
Retail Banking: In Tech We Trust, the third annual study of retail banks produced in association with the Economist Intelligence Unit, reveals that banks perceive the threat from tech companies operating in the financial services sector as much bigger today than a year ago. Among their concerns is a predicted dramatic decline in the use of cash on the high street by 2020, with fintechs facilitating the majority of payments, as well as freely available peer-to-peer lending through banking platforms.
David Arnott, chief executive officer at Temenos, says: “Our study shows that banks have clearly woken up to the threat fintechs pose to their business. Last year we found that regulation and compliance were receding as threats. This year we can see that that trend has accelerated. The banks’ response is to look at ways of beating the fintechs at their own game. This may be partnering or co-operating with service providers, or investing in their own digital platforms.”
The study reveals that banks are responding to the technical threat by making technology part of their offerings and investing in digitisation. Threats to banking are coming thick and fast from companies such as Google with its Android Pay, and by Apple Pay, and from peer to peer lenders and fintechs operating in the wealth management sector.
Banks are gearing their responses to help them to acquire and retain customers, offer better value, cross sell products and services and improve cyber security. However, there remain significant problems, with recruitment, integrating different systems and processes and legacy systems.
Ben Robinson, Temenos chief marketing and strategy officer, will discuss the study’s findings at the Economist Future of Banking summit in Paris today.
The study was based on a survey of more than 200 global, retail banking executives, more than half of whom were at C-level. The executives were asked about the challenges they face over the next five years and how they are responding.
The key findings show:
The threats will change the way the banking sector operates, killing the traditional branch/transaction based model (49%) and giving rise to fully automated branches (64%).
Banks see new entrants (26%), changing customer behaviour (22%), and new technology (24%) as significant threats.
Banks still face problems, with recruitment (35%), system integration and compliance (34%), legacy systems (31%) and client adoption of digital services (30%) seen as the biggest priorities.
Monica Woodley of the Economist Intelligence Unit says: “The digital revolution has moved from existential threat to potential survival strategy for the world’s retail banks and strategically banks have a number of responses. The correct path is not yet clear-cut.” (Temenos/mc/ps)
Temenos Group AG (SIX: TEMN), headquartered in Geneva, is a market leading software provider, partnering with banks and other financial institutions to transform their businesses and stay ahead of a changing marketplace. Over 2,000 firms across the globe, including 38 of the top 50 banks, rely on Temenos to process the daily transactions of more than 500 million banking customers. Temenos customers are proven to be more profitable than their peers: in the period 2008-2014, they enjoyed on average a 31% higher return on assets, a 36% higher return on equity and an 8.6 percentage point lower cost/income ratio than banks running legacy applications.
For more information please visit www.temenos.com
About The Economist Intelligence Unit
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