Traditional banking is a thing of the past, at least according to 203 senior retail banking executives surveyed by the Economist Intelligence Unit.
According to an Economist Intelligence Unit report for Temenos, the EU’s Second Payment Services Directive (PSD2), which will force banks to provide interfaces, APIs and data to third parties, is set to “tip the scales between banks and FinTechs for customer loyalty.” More than half of financial transactions will be made through FinTech companies rather than traditional retail banks by 2020, as the latest EU payments directive unleashes competition.
What is unclear is how the banks’ IT systems will cope with the ability to adapt to rapidly decreasing product development timelines and increased customer expectations during a time of constant cyber risks. The approach of some banks to cater for this rapid development has been to build their own technological solutions, others to buy FinTech start-ups – at a significantly higher cost – in an attempt to outpace their competitors.
The report concludes that traditional banks must collaborate with FinTechs to prosper. Plans to collaborate with FinTechs for access to modern technology-driven services seem on the cards as banks appear to have little appetite to spend money on IT. The survey revealed only 17% of retail banks plan to prioritize the modernization of IT systems.