Diminishing customer loyalty and growing competitive threats are forcing the banking industry to undergo “massive structural change,” according to new research.
A survey of 198 senior bankers by banking software systems provider Temenos found product innovation to be a “number one priority,” with 24% of respondents saying that they are looking to invest in this. This trend was particularly strong amongst retail banks, 26% of which cited it as a concern.
Other key priorities cited by respondents are digital channels, complying with new regulation and IT modernisation.
The biggest industry challenges were felt to be regulation, new competition and changing customer behaviour, although maintaining customer loyalty was named the single biggest issue, for the second year in a row, by 30% of respondents. Bankers expressed concerned that more and more empowered and better informed customers would begin to switch providers. Competitive pressures from non-banks and technology providers like Google and Apple worried nearly a quarter of respondents.
Attitudes to the cloud are changing rapidly. 86% of institutions surveyed now run at least one application in the cloud – 57% more than in 2009 – but with data security concerns mounting, 38% said that this poses a barrier to widespread adoption.
“The banking industry is undergoing a once in a generation shift, a second big bang,” said David Arnott, CEO of Temenos, “As these results confirm, it is digitisation, changing customer behaviour and regulation that are driving the change.”
He added: “What is encouraging about these results is that banks appear to be both cognizant of the challenges ahead and making many of the right investments to be able to offer the customer-centric banking services to compete successfully in the future.”