Banks are on their way to reevaluate their role in the financial services sector as fierce fintech competition emerges, according to a new study commissioned by Temenos.
Surveying around 300 banks across the globe, the report, courtesy of market surveyor Economic Impact, highlights that traditional financial institutions plan to evolve their business model in the coming years to satisfy shifting consumer expectations and respond to disruptions from payment, technology and e-commerce companies offering more personalised products and services.
Around four in five (79%) of surveyed respondents see the future of banking becoming “embedded” in consumers’ and businesses’ value chain, with one in five to soon begin offering banking-as-a-service (BaaS) and integrating embedded finance into their own products.
Kanika Hope, Chief Strategy Officer at Temenos, commented: “Banks need to tap expertise in new technologies like cloud and AI, as well as collaborate with fintechs and technology companies to offer embedded finance and build digital ecosystems.
“The case for the public cloud is becoming more apparent, 51% of respondents agreeing that banks will no longer own any data centres due to the move to public cloud in the next five years.”
Hope further pointed out that environmental concerns coupled with plans for increased business agility, efficiency and security are also pushing banks to adopt cloud-based services.
Another key technology that is bound to change the banking landscape is artificial intelligence, with 71% of respondents agreeing that unlocking value from generative AI will make the difference between winners and losers.
“If you do not have modern technology, younger generations will not bank with you, it doesn’t matter how long you’ve been around,” as said by a bank CEO quoted by Temenos.
Interestingly, many see the collaboration between banks and fintechs inevitable for the increased adoption of new tech, with 44% of the surveyed bank executives predicting that the banking sector will experience a majority stake acquisition spree in fintechs occurring in the next one to three years.
Jonathan Birdwell, Global Head of Policy & Insights at Economist Impact, added: “New technology and customer demands are the top two trends expected to impact banking in the next five years.
“To maintain their direct connection with the consumer, banks are recognizing that they must become true digital ecosystems. Customer centricity will also drive banks to offer more embedded ESG and sustainable banking propositions to their customers in the future.”