A new report by The Financial Times Focus and Mambu shows banks must redesign their role in society to avoid extinction.
More than two thirds (67%) of banks think they will lose market share within two years if they fail to digitally transform, according to a new report from cloud banking platform Mambu and The Financial Times Focus (FT Focus).
The ‘Evolve or be extinct’ report was conducted by FT Focus and surveyed over 500 senior banking executives globally to gain insights into their perception of the banking industry, now and in the future.
Banks Must Transform Urgently
The results illustrate the urgency for banks to modernise their offering as 58% of respondents predict they will cease to exist completely in the next five to ten years if they fail to change their business models.
With 74% of respondents predicting that technology giants such as Amazon and Google will hold the largest market share of the banking industry within just five years, the report showcases why now is the time for banks to make significant investments into their digital banking offering.
Two fifths (40%) of respondents said they intend to modernise to a platform-based offering post-pandemic, working with third-party providers to develop plug-and-play banking services run on flexible, independent systems.
Platform-based Banking is the Future
Modernising to a platform-based structure and investing in data capabilities are key factors that separate digitally advanced companies from the rest of banks.
“The last 18 months have shown banks just how important it is for them to have a robust and agile digital banking offering. And with 53% of those surveyed admitting they’re at risk of missing digital transformation targets, it’s time the industry took note of the financial ‘evolvers’ that are leading the charge in this space. These are fintechs, challenger banks, and forward-thinking traditional players that are prioritising purpose-driven services and great customer experience,” says Elliott Limb, CCO at Mambu.
But while these forward-thinking players can see the benefits of digital transformation, outdated perceptions of banking are slowing down progress at a time when ESG goals and the customer experience are set to be the key growth drivers of the future.
The Banking Industry’s Digital Transformation Diverges
More than four-fifths (81%) of retail banking leaders strongly agree that replacing outdated mindsets with a progressive social purpose is vital to growth strategy. This was reflected in profit falling down the priority list for banks, with ‘increased revenues’ ranked as only the fifth-biggest benefit of moving to a customer-centric banking model.
According to Limb, the research illustrates how the banking industry is diverging on its approach to digital transformation.
He says, “While retail banking has been slow to respond to the rapid changes in consumer behaviour brought about by the pandemic, there’s an emerging cohort of digital ‘evolvers’ that is bucking this trend. What’s more, these forward-thinking players can help digital laggards to level up their transformation efforts, setting a blueprint for the rest of the industry to follow while demonstrating the business case for a customer-centric approach.”
The report highlights the slow progress and challenges banks are facing as they move away from traditional and legacy banking services towards digital.