According to a global survey of 300 C-suite banking industry executives, 54% believe their financial institutions have faced increased competition from digital alternatives over the last three years. These executives, however, indicate that they are better positioned to compete. Notably, 84% said they have the necessary technological tools to create new digital products and services to some extent or more.
The survey was conducted for Economist Impact’s new report, “Threat assessment 2022: digital competition in global finance,” which was commissioned by WSO2, a global leader in digital transformation technology.
“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 a significant change in the industry dynamic. ”
The report examines how banking institutions are dealing with cultural change, embracing digital skills, and relying on technology to gain a competitive advantage, in addition to reviewing the competitive landscape.
Banks Rise to the Digital Competition Challenge
Many banks have responded to the competition by increasing their digital presence. 47% say they are serving customers to a large or great extent through digital channels (online or mobile applications), and 77% of these executives predict their organization will serve customers to a large or great extent through digital channels over the next two years.
At the same, the emergence of new digital entrants into the banking sector is altering perceptions of who is a competitor versus a potential partner. 26 percent of executives polled reported increased competition from banking as a service (BaaS) or embedded finance, such as from non-financial firms such as technology companies and telecoms providers, among others.
Meanwhile, only 12% of survey respondents reported increased competition from financial technology (fintech) firms, a stark contrast to the widespread fear of fintech competition just a few years ago. Notably, the Economist Impact report cites a 2021 report from banking consultancy Cornerstone Advisors, which discovered that 48 percent of banks polled had collaborated with fintech startups in the previous 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.”