Global banks are now more worried about their digital strategies than with regulatory concerns, as customers expect banks to be more like their non-financial competitors, Finextra reported on Tuesday (March 10).
In a new survey of 208 banking executives by the Economist Intelligence Unit, 46 percent said that implementing digital strategies is now the top priority for bank management, while only 35 percent said responding to regulation was still their top issue. (However, 60 percent of North American banks said they’re still feeling the regulatory heat.) Digital strategies also topped issues like cost-cutting (the top concern of 36 percent) and dealing with non-performing loans (32 percent).
About half of the global banks surveyed said changing customer behavior will also have a major impact on their industry over the next five years — and new entrants and competitors will also have a significant impact.
Who will those new competitors be? More than a third (36 percent) of the executives expect tech and e-commerce companies like Apple and Amazon to be the big threats. But 21 percent cited traditional retailers and other non-financial services companies. Only 13 percent said new banks are their biggest competitive concerns, and just 12 percent cited payment players such as PayPal.
Retail bankers’ response to that challenge is to focus on customers. Along with digital strategies, 40 percent of the bankers said their priorities include segmenting customers by product and service levels, and 37 percent said they’re focused on adapting the size and role of their branch networks.
Banks also cite plans to increase pricing transparency (40 percent), improve monitoring and governance (39 percent) and create simpler products (35 percent).
While the EIU’s annual survey offers some insight into what big-bank executives are thinking about, it doesn’t necessarily provide clear indications of what their banks will do. Case in point: The focus on what to do about branch networks. While some banks, including Citi, have pared back their branch networks and emphasized digital services — in some cases abandoning physical branches in entire U.S. states — others, like Santander, argue that branch networks are a competitive advantage that online-only banks can’t match.
Smartphones and online-commerce experiences “are quickly reshaping what is expected of retail banks. They must respond to these trends or be left behind,” said Monica Woodley, who edited the annual Future Factors report for the EIU. “Fortunately, this year’s survey shows a growing realization of this, with increased investment in digital strategies and other customer-centric improvements, as well as examples of where banks are working with new niche players to supply faster, cheaper services.”