Sparda-Bank Hamburg eG and CFIN -Research Center for Financial Services jointly analysed in their study “Next Generation Banking” the developments in the financial services sector by the year 2025. The study is based on a survey of 116 directors and executives from the banking and non-banking sector.
Banking Sector Under Pressure
The traditional role of banks as financial intermediaries is threatened by digitisation and the entry of competitors foreign to the industry, the study states. The digital competitors win primarily through user-friendly technology and innovative ideas and thus put the traditional business model of the banks under considerable pressure, the study continues.
In addition, banks will have to face a number of other challenges in coming years. 99% of study participants called on the cost pressures and declining income as the biggest challenge, followed by regulatory requirements (93%), the impact of low interest rates (90%), and the threat of new competitors (80%).
Reacting to the Changing Environment
In response to these changes, 97% of the study participants anticipate a cost cutting in the form of store closures and restructuring, as well as a large number of mergers (88%). Primarily affected by these developments will be the People’s Cooperative Banks and savings banks that have an extensive branch network.
As a key trend, the digitisation of distribution channels, banking products and business processes is seen. 93% of study participants believe it is very likely that mobile devices will crossliink with social media, providing new customer contact points as well as digital options for individual offer design result.
Structural Changes in Competition
Due to the high market dynamics, market and competitive structures will be changing significantly. Profiteers of these developments are mainly IT companies and start-ups, which are greatly expand their market share at the expense of the banks in the coming years. 92% of study participants call large Internet companies like Google and Apple the biggest competitors, followed by other payment service providers (90%) and start-ups (71%).
To remain competitive, banks should make their processes more flexible, the study says. In addition, an adjustment of the distribution channels would be necessary. 71% believe that the traditional branch will be replaced by sales through smartphones (97%) and the Internet (97%).
“For the success of banks in the future, it will be of central importance to be present on all channels”, said Prof Dr Jens Kleine, co-author of the study.
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