As many as a third of retail banks are looking to build a greenfield digital bank to ward off competition from upstart challengers and cherry-picking fintechs.
A survey of 405 global bank executives conducted by the Economist Intelligence Unit on behalf of Temenos, highlights how new technologies such as AI, open APIs and cloud are compelling banks to rethink their business strategies in preparation for a new age of digital banking.
Late last month, a report from Citi warned of a 30% revenue hit for incumbents as new digital first challengers enter the market. To avert an impending extinction-level event, Citi urged bank to "re-invent themselves and re-imagine banking" by building their own digital offshoots.
The EIU report finds that advancements in AI, machine learning, and Open Banking have replaced changing customer behavior and demands as the key driver of strategic thinking at banks around the world in both the short and longer terms.
Temenos chief Max Chuard says: “As the report highlights, forward-thinking banks are aiming to capitalise on Open Banking through progressive digital strategies, to become aggregators or build digital banks. To truly differentiate, banks need to modernise their end-to-end stacks, embrace agile deployment methodologies and adopt cloud-native digital banking software."
Banks are still looking to work with fintechs, the report stresses, with 56% of respondents saying that fintech-bank collaboration in sandboxes will become mainstream by 2025.