Banking’s Big Players are Fighting Back Against Challengers

European banking giants are “fighting back” against the rising threat of platform players, neobanks and payment providers.

That’s according to the results of a new study carried out by Economist Impact in collaboration with Temenos, which finds almost half (43%) of Europe’s banks are investing in fintech startups.

What’s more, at least a third (36%) of traditional banks in the region are building their own greenfield digital banks or fintechs.

“Fintechs and neobanks took the lead in using new technologies to provide better customer experiences,” explains Jonathan Birdwell, Global Head of Policy & Insights at Economist Impact. 

“European banks are now fighting back, emulating the way non-traditional players have used technology to reach consumers who had been underserved by traditional financial services, and to appeal to existing customers with support in managing their personal finances.”

Traditional banks see value in emerging technology

In a bid to understand emerging trends in the banking industry, Temenos commissioned Economist Impact to carry out a global survey of 300 executives belonging to various departments within retail, commercial and private banking institutions. Half were C-suite executives. 

These professionals spanned Europe (25%), North America (23%), APAC (18%), the Middle East and Africa (17%) and Latin America (17%).

Researchers discovered European banks are migrating core banking systems to public cloud and SaaS in greater numbers than their counterparts in other regions, with 21% of European banks seeing cloud as a strategic priority to ensure operations are agile and secure to compete with more nimble competitors. 

AI was also found to be a key part of technology investment strategy, particularly when it comes to improving customer experience and supporting digital marketing. Three-quarters (75%) of representatives from European banks believe the sector will be significantly impacted by generative AI.

Banks remain wary of fintech players

Economist Impact and Temenos’ report reveals banks based in Europe are more likely to view neobanks as their company’s biggest competitors over the next five years compared to other regions. 

However, payment players and fintech providers remain top of mind, with payments being the space where new entrants are predicted to gain the most market share. 

Banks are already working to see off or adjust to this threat, as demonstrated by HSBC’s recent launch of Zing, a new multi-currency payments app to compete with the likes of Wise and Revolut.

“The competitive landscape is shifting,” adds Kanika Hope, Chief Strategy Officer at Temenos. “As neobanks and fintechs experience growing pains and face funding difficulties, Europe’s banks are taking advantage of the opportunities afforded by open banking by pursuing collaborations with their challengers to offer a wider range of better services to their customers. 

“They are also investing in technology, using cloud-native banking platforms and SaaS to improve the customer experience and ensure their operations are agile and secure.”

Read the full report: Challenging the challengers: Europe’s banks face the competition

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