Non-bank competitors prompt banks to invest, finds survey
The threat of competition from technology companies, startups and non-banks is causing serious worry to nearly three-quarters of retail banks, causing four-fifths of them to invest in so-called ‘disruptive’ technologies, according to a new study by Infosys and non-profit organisation Efma.
The findings were released in the seventh annual study of ‘Innovation in retail banking’. According to the research, which surveyed over 100 retail banks around the world, approximately three quarters (72%) regard the threat from technology companies, start-ups, retailers and/or telecom players as high or very high, while 84% of retail banks have increased their investments in disruptive technologies and innovative services this year to deal with new industry competitors.
Over two thirds (69%) of banks believe that start-ups will have a high or very high impact on innovation and can help them to develop more innovative solutions. Mobility is the most sought after competitive solution; almost two thirds (59%) of banks expect mobile technology to have a high or very high impact on the market.
For example, the study highlights the success of TransferWise (payments) for its P2P model, which undercuts banks and ‘legacy’ competitors. The research also highlighted that multinational retailers, such as Tesco and Walmart, have launched banking products (independently and in partnership with GoBank, respectively) to compete with established financial services providers.
The most important new technologies after mobile as rated by banks are advanced analytics/big data where 57% of banks expect the impact to be high or very high. This is followed by open APIs (53%), and the Internet of Things (47%). Despite the impact of new technologies on the banking industry, 60% of banks are not upbeat about start-up challengers and partners. Concerns over regulation and security are high, with half of the banks citing these as the primary challenges of working with start-ups
Nevertheless, over two thirds (68%) of banks believe they are becoming more innovative; 84% are increasing their investments in channels; and 82% are increasing their spends on improving customer experience.
“Digitalisation continues to massively shake the business foundations of ‘brick and mortar’ banking institutions,” said Michael Reh, chief executive (Designate), EdgeVerve, Infosys. “Banks need to proactively disrupt themselves and explore working with innovative start-ups to accelerate change and develop a leading edge in a competitive market. To achieve this, a dual strategy will be critical. Banks need new capabilities to help their businesses grow in new ways. They also need to renew their existing systems, opening them up to benefits of mobility, analytics, cloud computing, and connected systems.”