New research from Economist Impact supported by Temenos finds that European banks are fighting back against competition from platform players, neobanks and payment providers.
According to the study, ‘Challenging the challengers: Europe’s banks face the competition’, almost half (43%) are investing in fintech start-ups and a third (36%) are building their own greenfield digital bank or fintech company.
Kanika Hope, chief strategy officer, Temenos, comments: “The competitive landscape is shifting. As neobanks and fintechs experience growing pains and face funding difficulties, Europe’s banks are taking advantage of the opportunities afforded by open banking by pursuing collaborations with their challengers to offer a wider range of better services to their customers.
European banks are also migrating core banking systems to public cloud and SaaS in greater numbers than their counterparts in other regions. Over a fifth (21%) of European banks see cloud as a strategic priority, ensuring their operations are agile and secure to compete with more nimble competitors.
AI is also a key part of their technology investment strategy, particularly to improve the customer experience and support digital marketing, with three quarters (75%) of European bankers believing that the banking sector will be significantly impacted by generative AI.
The report reveals European banks are more likely to view neobanks as their company’s biggest competitors in the next five years compared to other regions. However, payment players and technology providers continue to be top of mind, with payments being the space European banks predict new entrants will gain the most market share.
Jonathan Birdwell, global head of policy & insights, Economist Impact, says: “Fintechs and neobanks took the lead in using new technologies to provide better customer experiences. European banks are now fighting back, emulating the way non-traditional players have used technology to reach consumers who had been underserved by traditional financial services, and to appeal to existing customers with support in managing their personal finances.”
Despite the headway made by incumbents, they are still lagging challenger banks in customer service levels. The Competition and Markets Authority’s (CMA) latest ranking of personal banking service quality found that Monzo, Starling and First Direct were the top three firms respectively for overall service quality, online and mobile banking services, and overdraft services.
Meanwhile, high street lenders have faced high numbers of complaints related to “debanking” and branch closures.
Source: Finextra
