The seventh annual “Innovation in Retail Banking” report compiled by Infosys and Efma has revealed that as much as 84 percent of retail banks across the world have substantially expanded their spending on cutting-edge technology in a bid to stay ahead of emerging competitors.
The report was compiled by Infosys Finacle, which is part of EdgeVerve Systems, a subsidiary of Infosys, and Efma – an international non-profit focused on the promotion of tech innovation in the financial services industry.
New Competition from Startups a Major Concern
Among the key highlights of the report, which involved 100 retail banks operating in different parts of the world, is that slightly over two-thirds, or 69 percent, are acutely aware of the new competition coming from startups and are also willing to recognize the beneficial impact of this new competition on tech innovation and the development of the banking industry as a whole.
This beneficial impact includes the new business models that are being used by the startups. Peer-to-peer banking, for example, is bringing costs down, a fact that 40 percent of the retail lenders involved in the study consider important.
“Digitalization continues to massively shake the business foundations of ‘brick and mortar’ banking institutions”
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At the same time, however, retail banks are worried that working with startups as partners or competing with them could present a challenge with regard to regulatory compliance as well as security. This is true for 60 percent of the respondents in the study.
Mobile, Big Data, and IoT
When it comes to specific tech developments and channels, the majority of respondents identified mobile solutions as the top priority: 59 percent of them expect that mobile technology will have a high or very high impact on the banking industry in the future.
Next in order of priority comes big data and analytics, with 57 percent of respondent banks believing it will have a considerable disruptive effect on banking. Open APIs take the third place in perceived order of importance, with 53 percent expecting a significant impact from them, and the Internet of Things comes fourth, with 47 percent of respondents identifying it as a tech with serious disruptive potential.
The Executive Vice President and Chief Executive Officer (CEO) designate of EdgeVerve commented on the findings: “Digitalization continues to massively shake the business foundations of ‘brick and mortar’ banking institutions. 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.”
Patrick Desmares, Efma’s Secretary General, commented, “”This year’s global retail banking study demonstrates that banks are eager to innovate, develop formal innovation practices, and increase their involvement with start-ups. This is a step in the right direction, but retail banks must be confident about the value of their start-up investments in order to collaborate with start-ups.”