To compete with challengers from outside the industry, banks are pushing hard to modernize their IT systems. Yet changes in customer behavior have arisen as their most daunting challenge.
Branch offices are so yesterday. For many consumers, the ATM represents the sole physical point of contact with their bank. Customers use eBanking to transfer money electronically and smartphones at the Point of Sale. Banks from around the world have identified this changed customer behavior as the biggest challenge for their business. These were the findings of the survey "Shifting sands: Banking in the digital era," conducted by Temenos, a technology provider, and corporate consultants Capgemini. This eighth edition of the study involved polling of 201 leading bank employees from financial corporations worldwide.
Previous studies had found that banks groan first and foremost about their regulatory load. Adjusting IT systems to new laws and provisions has always been the greatest challenge for bankers.
It's different this time though: 22 see satisfying customer needs and customer retention as their highest priorities. Another 18 cited the profitability of their business. Only then did the group of respondents emerge citing regulation as their top priority (17 percent). A similar-sized group bemoaned the potential for lost market share through increased competition (17 percent).
The bankers don't necessarily see that competition emerging from within the financial sector itself. This is hardly a new insight, as a year ago many of those surveyed (24 percent) cited concerns that a technology company like Apple, Google or eBay would serve as a potential competitor (2015: 27 percent). Established financial institutions are seen by 21 percent as potential rivals, but start-ups only by 14 percent. A year ago 19 percent saw 'Fintechs' as threats to play a larger role in the financial market.
The digital transformation of the banking and financial sector will play a role at this year's CeBIT as well. One focal point will be the new SCALE11 platform that will host 150 startups, including Fintechs.
To remain relevant players in the financial market, the study reports, the banks intend to take care of their internal housekeeping. IT modernization has thus been given top priority this year, a first. A year ago it was given significantly less urgency (fourth on the priority list). Innovation remained as important as before for the bankers (ranked second).
In 2014 bankers cited the tapping of new customer channels (such as mobile and web) as their top priority. One year later those channels appear to have been established, as this task no longer stood so high on the list. Something else new on the minds of financial managers: recruiting talent. In the view of Ben Robinson of Temenos, who authored the study, the wealth management field in particular is lacking for experienced customer consultants.
Systems for compliance and risk management still claim fifth place on the priority list. These solutions have already been implemented on a large scale in bank IT departments. Even so, it's unlikely that regulation will ever fully disappear from the task list.