The requirement to be online with a mobile and social media presence – to be digital – is now the primary concern of retail banks as they worry about disintermediation from technology rivals.
According to a survey from the Economist Intelligence Unit (EIU) which questioned 208 global c-suite executives and included 22 in-depth interviews, it has replaced regulation as retail banks’ chief fear, with an accompanying worry that revenue from retail banking will fall from 35% of revenue now to just 16% in 2020.
Business banking and the corporate sector is, however, expected to grow from 31% of a bank’s revenue now to 36% by 2020, reflecting how bankers are targeting corporates for growth. Of course, it has to be the ‘right’ corporate with the impending Basel III capital adequacy regime making large multinational corporations (MNCs) generally attractive, but collateral requirements penalising other corporates and driving them to the capital markets for funding.
The EIU survey, sponsored by Temenos, found that regulation continues to be important and is expected to have ‘the most effect on the industry overall’. However, banks now feel more comfortable with the regulatory challenge facing them. Regulation was rated the top concern in last year’s survey but in 2015 has fallen to the chief worry of only 35% (versus 49% previously). Simultaneously, introducing a digital strategy has risen from 37%, fourth on the list of worries last year, to top now with 46% citing it as their prime aim.
Speaking at the press conference for the survey in London this week, Monica Woodley, editorial director for content solutions at EIU, said: “Technology and e-commerce firms are the competitors that banks fear most,” citing a rise from 22% of respondents highlighting it last year as a worry, versus 35% this year.
According to Ben Robinson, chief strategy officer, at Temenos: “You also need integration and real-time updating capabilities to offer the best multichannel banking experience and this will become more importance under the pending intra-day reporting requirements.”
He added that banks should also be using data analytics better to take advantage of the store of customer data they possess. Whether this will lead to better data rich payment information for corporates remains to be seen. Nonetheless, it would certainly help the financial supply chain if faster, traceable payments with minable accounting details become more widely available as banks pursue a digital strategy.
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