According to a Temenos and Deloitte report published, 29% of senior banking executives see their biggest challenge as retaining the loyalty of more demanding and better informed customers.
The report on the TCF2013 survey results, produced in collaboration with Deloitte, shows the industry at an inflexion point, still grappling with the barrage of post-crisis regulations but with priorities shifting to reflect the significant and growing challenge posed by a more demanding, less loyal customer base and by more intense competition – with, for the first time, respondents as concerned about the competitive threat from outside as from within the industry.
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The industry faces changing challenges. Last year’s survey showed that the industry saw its biggest challenge as coping with new regulations. This year, financial institutions see their biggest challenge as retaining the loyalty of their more demanding, better informed and less loyal customers, cited by 29% of respondents. Financial institutions also see a much bigger threat from competition, cited by 23% of respondents compared to 17% in 2012.
Product innovation, IT modernisation and investing in channels top the industry’s priority list. Reflecting the change in their environment, financial firms are focusing primarily on the areas that can help them compete more effectively and retain customer loyalty. Interestingly, it is not just online channels that are moving up the corporate agenda, but also branches which the industry increasingly sees as a key plank of a multi-channel strategy. In 2013, 31% of respondents named branch and online channels as their top priorities, compared to 20% in 2012.
Financial services firms see, for the first time, as much of a competitive threat from outside as from within the industry. While respondents cited large incumbent banks as their single biggest competitive threat, almost half named competitors from outside of the industry such as supermarkets and peer-to-peer intermediaries as their biggest threat. Corporate and Private Wealth Managers are most concerned about the possibility of their customers going directly to the capital markets for their financing needs, cited as the biggest threat by 32% and 25% of respondents from these sectors, respectively. The fastest-growing threat, however, mentioned by 18% of respondents versus 11% in 2012, is perceived to come from payment providers, such as PayPal, who banks increasingly acknowledge could take over the customer interaction.
IT budgets are set to rise faster than in any of the previous five years. This year’s survey has the highest ever proportion of banks, 65%, predicting rising IT budgets over the next 12 months. Consistent with the corporate priorities, IT spending is rising to meet competitive and customer pressures, with spending on channels the fastest-growing area. Core banking renewal and business intelligence are the second and third highest priorities.
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By GlobalDataThe industry is becoming more enthusiastic about cloud computing. We have recorded a significant change in the industry’s attitudes to cloud, with now more than 80% of firms running at least one application in the cloud – up from 57% in 2009. While there are still perceived to be strong barriers to putting core processing in the cloud, these too seem to be diminishing as providers deal with regulators’ misgivings and overcome concerns about data privacy.
