Retail banks see financial technology firms as significant challenges and are aggressively embracing new technologies to innovate, according to a research conducted by Infosys Finacle and global non-profit organisation Efma.

More than two-third (70%) of the bank said they consider the threat from technology companies, start-ups, retailers and/or telecom players as high or very high. Over half of the 158 banks surveyed across 56 countries said they consider the threat from technology companies and start-up challenger banks as significant.

The study revealed that proportion of banks with an innovation strategy has surged to 74% in 2016 from 37% in 2009. However, the proportion of banks increasing investment in innovation has slid to 78% from 84% in the prior year.

Also, 73% of the respondents consider working with startups as the best way to leverage new technologies.

Meanwhile, 86% of banks cited that emerging competitors will have a significant impact in the payments space.

Legacy technology environments are an impediment to digital transformation for half of the banks surveyed. Lack of unified vision and a lack of skills and expertise are considered as challenges by 44% and 38%, respectively.

Seventy nine percent of the banks cited advanced analytics and big data as the most disruptive new technology for banks.

Mobility and wearables and open APIs were regarded as most disruptive by 75% and 69% of banks, respectively.

Infosys Finacle EdgeVerve global head Sanat Rao said: "Changing customer preferences, rapid evolution of technology and pressures from outside of the traditional banking world are accelerating a major transformation of the banking industry.

“The confluence of these forces is putting digitization at the center of technology renewal, enabling multi-channel touch-points for superior customer service. From the research findings and customer interactions, it will likely be the development of open API's, AI and blockchain that shall cause the next big change in banking."