In order to gain a competitive edge over new start-up rivals, an increasing number of retail banks (84%) have increased their investments in technological innovations, according to a report by Infosys Finacle, part of EdgeVerve Systems, and Efma.
Sixty eight percent of the 100 banks surveyed said that they are becoming more innovative, 84% said that they are boosting their investments in channels, while 82% said that are increasing investments on enhancing customer experience.
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Nearly 72% of the banks said they regard the threat from technology companies, start-ups, retailers and/or telecom players as high or very high, while over 69% opined that start-ups will have a high or very high impact on innovation and can help them develop more innovative solutions.
Also, nearly 40% of the respondents were of the opinion that the innovation business models developed by these startups such as peer-to-peer banking, bypassing conventional inter-bank wire transfer mechanisms to drive cost savings will significantly impact the industry.
After mobile, the most significant technological disruptors for banks are advanced analytics/big data with 57% of banks expecting the impact to be high or very high, which is followed by open APIs (53%), and the Internet of Things (47%), the study found.
Mobility is the most sought after competitive solution, with 59% of banks expecting them to have a high or very high impact on the industry, according to the report.
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By GlobalDataThe survey further revealed that in spite of the impact of new technologies on the banking sector, 60% of banks are not upbeat about start-up challengers and partners, and half of the banks believed that regulatory constraints and security concerns are the main challenges of working with start-ups.
EdgeVerve executive vice president and CEO (designate) Michael Reh said: "Digitalization continues to massively shake the business foundations of ‘brick and mortar’ banking institutions. Banks need to proactively disrupt themselves and explore working with innovative start-ups to accelerate change and develop a leading edge in a competitive market.
"To achieve this, a dual strategy will be critical. Banks need new capabilities to help their businesses grow in new ways. They also need to renew their existing systems, opening them up to benefits of mobility, analytics, cloud computing, and connected systems."
