Written by the Economist Intelligence Unit (EIU), ‘Branching Out: Can Banks Move From City Centers to Digital Ecosystems?’ is a study into the potential trajectory of banking following COVID-19.
Using a sample of over 300 senior industry executives from around the world, the report measures responses to several key trends, including the decline of the high street, the evolution of tech ecosystems, and next-gen customer experience (CX).
Some of the important takeaways are:
- 65% of bankers believe physical branches will be phased out (“dead) by 2026
- 80% consider a focus on CX for differentiation more important than products
- 47% expect tech ecosystems to gain prevalence in the next two years, forging partnerships between third parties engaged in banking and non-banking activities
- 66% of banks consider technology as the sector’s most prominent driver for change over the next four years
The pandemic: Causing a culture change
Although the gradual ubiquity of digital technology in banking was close to a certainty before the pandemic, the conditions imposed on customers around the world were perfect for accelerating its adoption.
With physical branches closed, banks had no choice but to develop their online platforms and customers had no option but to use them. Now, the convenience and enhanced functionality of these same platforms appears to carry a death sentence for branches even as global lockdowns begin to end.
Some banking executives, such as Aalishaan Zaidi, Global Head of Digital Banking at Standard Chartered, credits the pandemic as revitalising attitude and culture:
“The big shift for us was our belief that we could change fast if we really wanted to. [Prior to the pandemic] we would have never done the partnerships we are doing now.”
Enhancing the competition
Having to shift away from branches took most high street banks out of their comfort zone and handed an easy advantage to challenger banks, which, for the most part, offered customers a superior online or app-based experience through their dedication to digital.
Kanika Hope, Chief Strategy Officer at Temenos, argued that banks are now absorbing the lessons they can learn from competitors in Big Tech with the aim of revitalising their legacy business models.
“Many now aspire to develop digital ecosystems that bring more human, differentiated experiences to their customers using the power of cloud, SaaS and AI. [The new report] shows that bankers now understand that technology will be an enabler for these new business models and is critical to their competitive differentiation.”
Whether physical branches will be extinct in the next five years (or at all) remains unknown. Whatever the case, it seems clear that COVID-19 has, as with so many industries around the world, set banking on a new and exciting course.
Download Temenos' report here
- How does the open banking landscape look going into 2023?Banking
- The development of Application Programming Interfaces (APIs)Financial Services (FinServ)
- Fintech LIVE LONDON 2022 round-up and dates for 2023Financial Services (FinServ)
- Revolut is top searched online bank in Europe, says studyBanking