The financial markets in North America are lagging behind other countries when it comes to prioritizing digitalization, according to a study by the Economist Intelligence Unit, commissioned by Temenos, a Switzerland-based banking software provider.
Banking executives surveyed from North America indicated that concerns about compliance costs and regulatory fines are keeping them from investing heavily in new technologies, such as artificial intelligence and Blockchain.
Approximately 400 global banking executives were surveyed in February and March about the challenges retail banks expect to face through 2020, and the strategies they are implementing in response.
Only 34 percent of CEOs at large North American banks said they expect new technologies to have a major influence on banking, whereas, among other global regions, 48-54 percent of CEOs said they believe new technologies will have a significant impact.
Fifty-six percent of North American bank CEOs indicated that they expect regulatory factors, such as fines and penalties, to have biggest impact on banking in coming years.
The results of the survey contrast with those of a poll conducted during the Consumer Bankers Association’s 2018 annual convention. When asked what the top issue facing the banking industry would be over the next three years, one-third of attendees chose the option “Innovating and creating new products and solutions” while only 4 percent selected “Navigating through a new regulatory environment,” the No. 1 answer each of the previous five years the question was posed at the event.
Meanwhile, on a global scale, the Temenos-commissioned survey indicated that banks are continuing to invest in tech-oriented updates to their business models, with more than half saying they are evolving to become aggregators of third-party products, as well as opening services to third-party developers and viewing banking as a “digital ecosystem.”
About 60 percent of global bank CEOs said they are developing niche propositions for their own customers, in part because they believes that customers are willing to forego in-person communication with their banks if it means lower-cost or free services. They also believe that cash transactions will dwindle to 5 percent or less of all global transactions and that retail banking will be at least 80 percent automated, according to survey responses.
As banks shift toward digitally oriented business models, about 70 percent of respondents said they are making significant investments in cybersecurity. Another 54 percent said they are focusing on individual delivery capabilities, nearly 50 percent said they are moving toward cloud technologies and 37 percent are modernizing their front- and back-office systems.
Among the most common concerns among respondents, more than half of globally active bankers indicated that they worry about inconsistent data protection standards, including how the U.S. market intersects with the European Union’s Gross Domestic Product Regulation.
Of the respondents, almost 18 percent were from North American nations, 25 percent were from Europe, 25 percent from the Asia-Pacific region, 16 percent were from Latin America and 16 percent were from Africa and the Middle East.
Half work for parent groups with assets over $10 billion (U.S.), and the other half work for smaller organizations, including co-operatives and community banks. Fifty-one percent are at C-suite level and 10 percent are board members. Twenty percent work in finance roles, more than 10 percent work in general management roles, 9 percent work in information technology, 16 percent work in marketing, sales and customer service constitute, 6 percent work in information and research and 5 percent work in research and development.
Additionally, in-depth interviews were conducted with 20 senior executives and experts from banks, fintech companies and security advisers as part of the survey.