Priority for retail banks shifts to digital from regulation
An expected collapse in retail lenders’ profitability requires adapting channels and models to face demands of a digital generation.
GENEVA, Switzerland – 10th March 2015 – The creation of a relevant and coherent digital strategy has become the most pressing concern for retail banks worldwide, overtaking their worries over regulation, according to an in-depth survey released today by Temenos (SIX: TEMN).
The report, the second in a series conducted for Temenos by The Economist Intelligence Unit (EIU), also found that retail banks expect their profitability to decline significantly as more nimble and technologically responsive competitors start to focus on the sector. A collapse in profitability could be averted, Temenos believes, by embracing the new digital opportunities and investing in giving consumers a much more interactive and personalised experience.
“The Temenos report confirms that there has been a dramatic rise in the importance of digitization in banking in the last year. Banks are aware that tech firms are breathing down their necks. Changing customer behaviour is now overtaking regulation in its expected impact on the industry, and the survey confirms that banks are waking up to that threat and finally looking to invest in digital strategies to help in their fight to retain or add customers.”
Ben Robinson, Chief Marketing and Strategy Officer, Temenos
The report for Temenos, the market leading provider of banking software systems to the financial services industry, will be published as an EIU ‘Future Factors’ report and unveiled at an Economist Future Of Banking Summit in Paris today. Overall, the survey shows that, for bankers, creating a responsive digital strategy has become the most important priority this year, having been ranked just fourth in 2014; in 2015 46% of respondents cited digital as their highest priority in the next five years, while 35% stressed their response to regulation and 36% pointed to cost cutting. Last year, 51% had said that regulation would be the most important factor shaping the industry in the coming years and although this remains likely to have a big impact on the industry – this has reduced to 46% this year.
Temenos CEO David Arnott will discuss the future of digital banks at the summit in Paris. The report was based on a survey of over 200 global retail banking executives, more than half of whom were C-level. The executives were asked about their views on the challenges and changes that they expect their industry to face up until 2020.
The key findings show:
- Digital strategy has dramatically risen to the first priority from fourth last year;46% of banks cited digital as their highest priority for the next five years;
- Regulation is still likely to have an impact on the industry but is no longer a priority for retail banks;
- Tech firms such as Google and Apple are applying pressure to banks; 36% of respondents believed that competition was more likely to come from non-financial firms such as technology and ecommerce companies; and
- The expected collapse in the profitability of retail banking profitability is worrying; 35% cited retail banking as their primary source of income today, but only 16% thought it would still be in 2020. Banks, hence, need to find new channels and models to help them make profits and reduce costs.
Monica Woodley, The Economist and Ben Robinson, CMO, Temenos discuss the findings...
Monica Woodley of The Economist Intelligence Unit said;
“Regulation is no longer the biggest fear factor for retail banks,” While regulation will still have a huge impact on the industry to 2020, banks are recognising the incredible effect changing customer demands will have as well – and they are rightly responding by prioritising their digital strategy.”
About The Economist Intelligence Unit
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