Dubai, UAE, June 2022: In a global survey of 300 C-suite banking industry executives, 54% say their financial institutions have faced greater competition over the past three years from digital alternatives. However, these executives also indicate that they are better positioned to compete. Notably, 84% of respondents reported that they have, to some extent or more, the necessary technological tools to create new digital products and services. The survey was conducted for a new report1 from Economist Impact1, “Threat assessment 2022: digital competition in global finance”, which was commissioned by WSO2, a leader in digital transformation technology.
In addition to reviewing the competitive landscape, the report examines how banking institutions are addressing cultural change, embracing digital skills, and relying on technology to achieve a competitive advantage. The full report is available here.
Banks Rise to the Digital Competition Challenge
Many of the banking firms have responded to the competition by investing in their digital presence. Among survey respondents, 47% say they are serving customers via digital channels (online or mobile applications) to a large or great extent, and 77% of these executives predict their organisation will serve customers via digital channels to a large or great extent over the next two years.
“All signs in the Economist Impact report point to established financial institutions successfully rising to the digital challenge”, said Eric Newcomer, WSO2 Chief Technology Officer. ”A majority of survey respondents say they have the necessary tools, are culturally ready, and have the talent needed to create new digital products and services, which to me represents significant change in the industry dynamic”.
At the same time, the growth of new digital entrants in the banking sector is shifting views on who is a competitor versus a potential partner. Among executives surveyed, 26% identified increasing competition from banking as a service (BaaS) or embedded finance, such as from non-financial firms including technology companies, and telecoms providers, among others.
Meanwhile, only 12% of survey respondents listed increasing competition from financial technology (fintech) companies—in stark contrast to the widespread fear of competition from fintechs just a few years ago. Notably, the Economist Impact report cites a 2021 report2 from banking consultancy Cornerstone Advisors, which found that 48% of banks surveyed had partnered with fintech startups over the past three years.
“The intense competition facing banks is leading to unprecedented digital collaboration”, said Seshika Fernando, WSO2 vice president of banking and financial services. “Banks once jealously guarded their data on proprietary systems to grow their customers and revenue share. Today, they are accelerating their growth by partnering with fintechs to add new services, embedding banking-as-a-service solutions in online retail offerings, and tapping the insights of agencies with big data expertise”.
1Economist Impact, “Threat assessment 2022: digital competition in global finance,” by Kim Andreasson with Michael Frank, May 2022
2Cornerstone Advisors, What’s Going on in Banking 2021: Rebounding from the Pandemic, January 26 2021