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Opinion > Temenos

To survive, big banks must learn from their smart, young siblings

Steen Jensen, managing director for Europe at Temenos | 09:00 Wednesday 20th November 2019

Europe’s banks face greater competition, greater transformation and greater opportunity than they have ever seen before.

What we are seeing today across the financial services landscape are signs of disruption and change — of a new economic era — causing old business models to falter as new models are eagerly adopted by banks. A tech revolution is changing the way consumers bank, moving banking from branches to mobile devices and from traditional banks to new challengers.

Faced with their competitors’ stylish payment cards, emoji-laden UX and ability to utilise data on customer behaviour, traditional banks are under pressure to digitise at pace.

The success of this tech revolution, however, doesn’t lie with the new entrants. In fact, the prize is likely to be won by the traditional banks, which have the capital and the customers (and their valuable data). When it comes to being the trusted advisers and custodians of financial assets, traditional players remain the preferred choice and they have brand power to leverage.

In order to be successful, traditional banks must grasp the opportunity, reinvent their business models and embrace technological change. They must learn from their younger competitors.

Banks are beginning to reject monolithic, legacy IT infrastructure and branch-based relationship management, ushering in a new era of one-click digital banking tailored to meet the precise needs, life stage, and social and economic demands of customers. Robotic back offices and app-based services are creating micro bank environments that live in each customer’s pocket.

According to research we conducted in co-operation with the Economist Intelligence Unit, among over 400 global banking executives, this tech-centric approach to banking is the future. Four in 10 banks see their business models evolving towards becoming a digital ecosystem. New technologies, such as AI, machine learning and blockchain, have surpassed changing customer demands and regulation as the key driver of strategic thinking at banks around the world, both in the short (36%) and longer term (42%).

The next natural stage in this revolution is to leverage technology to create a ‘Bank of You’, centred around customer intimacy, understanding their needs and allowing them to select from a dashboard of personalised services in a Spotify-like model. Banks are set to become tech hubs for a range of financial services delivered across multiple channels into the hands of the consumer.

Europe’s established banks are in a strong position to capitalise on the opportunities this technology revolution brings, but continued investment in future-proofing their digital offering and designing it around their customers will be essential. By doing so, the banks will reap massive benefits for their businesses.

Using data-driven analysis, the Temenos Value Benchmark Program reveals how technology is dramatically improving banks’ profitability and performance levels. The results show that by transforming their end-to-end digital banking platform, banks have been able to achieve industry-leading profitability while innovating faster and delivering exceptional digital experiences for their customers. The benchmark demonstrates that top-performing banks using Temenos software invest in front-to-back digitisation, thereby achieving industry-leading, cost-income ratios of 25.2%.

Ultimately, by seeking out end-to-end digital transformation and tailoring services to the needs of the customer, banks will be better equipped to leverage the power of their brands and offer first-class transformative banking services.

The technology exists, banks just need to embrace it. So, banks: what are you waiting for?

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