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Retail banks see need to invest in innovation

Competition from startups prompting new ventures globally

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  • Written by  Website Staff
 
 
Retail banks see need to invest in innovation

Over 8 in 10—84%—of retail banks around the world have increased their investments in disruptive technologies and innovative services this year to deal with a surge in new industry competitors, according to research by Infosys and the international retail finance organization Efma. This comes at a time when the perceived threat of market disruption in retail banking is mounting.

The report, which surveyed over 100 retail banks internationally, found that approximately three quarters (72%) regard the threat from technology companies, start-ups, retailers, and/or telecom players as high or very high. The report highlights that start-ups introducing new technologies and business models that are counter to established retail banking practices present both challenges and opportunities for banks.

"This year's global retail banking study demonstrates that banks are eager to innovate, develop formal innovation practices, and increase their involvement with start-ups,” says Patrick Desmarès, secretary general, Efma. “This is a step in the right direction, but retail banks must be confident about the value of their start-up investments in order to collaborate with start-ups.”

Key findings from the report include:

• Over two thirds (69%) of banks believe that start-ups will have a high or very high impact on innovation and can help them to develop more innovative solutions.

• Start-ups are introducing new business models such as peer-to-peer (P2P) banking, bypassing conventional inter-bank wire transfer mechanisms to lower costs. About 40% of respondents believe such models will have a significant impact on the industry.

• Despite the impact of new technologies on the banking industry, 60% of banks are not upbeat about start-up challengers and partners. Concerns over regulation and security are high. About half of the banks cited these these factors as the primary challenges of working with start-ups.

• Over two thirds (68%) of banks believe they are becoming more innovative; 84% are increasing their investments in channels; and 82% are increasing their spending on improving customer experience.

• The most important new technologies (after mobile) for banks are advanced analytics/big data, where 57% of banks expect the impact to be high or very high. This is followed by open APIs (53%), and the Internet of Things (47%).

• Mobility is the most sought-after competitive solution; almost two thirds (59%) of banks expect mobile technology to have a high or very high impact on the market.

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