Bank executives throughout Europe have now put the topic of digitalisation on their agendas and given it a high level of priority – although not all are pursuing it with the same sense of urgency. This is the key learning from a survey of top decision-makers conducted by GFT on the future of the financial sector. Banks in the south European states are particularly active and already have extensive offerings, for example in the field of mobile payment. Germany also compares favourably with other European countries and is taking a proactive approach to digitalisation. An increasingly strong focus is being placed on the customer’s needs and wishes – which is thus becoming a key driver of the digitalisation process.
In the past few months, some observers have painted a fairly negative picture of the future for Europe’s banking sector: agile start-ups attacking banks in their core business fields; giant banking corporations out of touch with the needs of their customers; the closure of ever more branches as millions of tech-savvy customers turn their backs on traditional banks and succumb to the appeal of smart young start-ups. But are such descriptions borne out by reality? Are Europe’s banks really lagging so far behind the digital lifestyles of their customers? To put it simply: yes, they are. However, the financial sector is now waking up to this fact. Things are beginning to move – and much faster than many expected. These are the findings of our survey conducted among the top decision-makers of Europe’s banks.
The most important results speak for themselves:
- Over 83% of banks are already working on a digitalisation strategy or have initiated one or more projects. This shows: the competition is in full swing.
- The top “must haves” include digital banking platforms and mobile payment solutions.
- Over 90% of respondents regard customer satisfaction as a very important criterion for the strategic realignment of their institutes. The majority of respondents believe that a consistent omni-channel approach is needed to increase their appeal to customers.
This clear focus on the customer could become a decisive factor for successful digitalisation strategies. Recent consumer surveys, for example, indicate that customer expectations will play an increasingly important role in shaping the future of the banking sector. Decisive for retail banking: the consistent integration of digital access paths raises customer satisfaction and customer loyalty.
Is digitalisation therefore a “no brainer” for Europe’s banks? No; our survey highlights the weaknesses:
- Just 8% of banks already have a full range of solutions on the market; over 50% believe it will take at least another 3-5 years before their digital strategy has been implemented.
- Many of the respondents have already integrated their digital banking platforms, at the same time around 60% regard this as an urgent priority.
- Although the modernisation of the entire sector is in full swing, only a third of respondents believe it is nearing completion.
Italian banks are taking a particularly focused and active approach to the digitalisation of their industry. The respondents here regard the competition within their industry as very strong. The Italians also actively put customers at the heart of their activities by integrating their feedback into the digitisation strategy and operational implementation. Almost 60 percent already offer a mobile payment system, 14 percentage points higher than the average of all respondents. For Germany, the digitalisation of the banking sector is an evolutionary process: looking at the obstacles for digitalisation, they do not regard the lack of standards as a major stumbling block. By contrast: market experts believe it is one of the main reasons for the slow adoption of a mobile payment system in Germany. Only 4 percent of the German banks though are not yet dealing with the issue of digitalisation. The Spanish banking sector faces an ambivalence reflected also in their budgets for digital projects: 35 percent of the surveyed banks have budgets of less than 5 million US dollars, whilst 18 per cent have budgets of over 20 million US dollars – with both of these extremes leading the way in comparison with the other surveyed countries. Altogether it can be said that the Spanish banking sector, too, has already started the Digital Transformation. Spanish banks are showing a high focus on real-time marketing and real-time decisions as a way to evolve their digital platforms.
The main priorities with regard to digitalisation strategy are the establishment of digital platforms and the integration of these systems into existing IT systems. Cooperating with fintech start-ups is lower down the list (whereby Germany leads the way in this field), as is the establishment of solutions for personal finance management or real-time analyses.
What are the obstacles on the way to creating the digital bank of the future? All banks seem to regard internal organisation aspects as a major stumbling block as well as the challenge of recruiting skilled staff. These two factors were at least the most frequently cited problem areas. They were followed by difficulties relating directly to the restructuring of existing IT systems as well as the implementation of a consistent image across all technical platforms.
All in all, there are still numerous challenges for the banking sector and it will take a few more years until the industry has completed its digital transformation process in Europe. Nevertheless, the preliminary conclusion is generally positive: most banks have put the topic on their agenda and are working proactively on solutions. However, sustained investment in IT infrastructures and skilled personnel are absolutely essential for a successful implementation process.
GFT believes the results of this survey show that retail banks should continue to pursue and enhance their focus on the customer as the main driver of their digital banking strategies. This can be achieved through
- Establishing service quality and consistency in key areas like digital platforms and mobile payments before moving on to more advanced / complex service elements.
- Focusing on innovation to differentiate their offerings in increasingly competitive markets
- Prioritising the alignment of their organisational structures and staffing with a customer-focused digital banking strategy
- Partnering with external specialists to fill gaps in internal expertise, leverage best practices from other markets and speed up time to innovation
- Including branch modernisation into their digital banking strategies to create a true omni-channel, customer-centric approach.
Further information on GFT’s survey of experts and the digitalisation of the banking sector can be found on the following pages: