New banks

Banks want to invest in their digital futures, investors less so

  • Bank investors are resistant to investing in long-term change projects.
  • New research by Oliver Wyman describes a way forward for banks to invest in their digital futures.
close

Email a Friend

Banks want to invest in their digital futures, investors less so

Say what you want about the real competitiveness of new digital banking upstarts, but the future is increasingly digital.

  • For the most part, banks get that and they are actively investing in increasing their tech capabilities — even if it’s a token investment.
  • The average bank invests about 5 percent of its revenue on change programs.

But confidence in these change programs is low. Banks aren’t succeeding in winning investors over to embrace their innovation programs, according to a new study by Oliver Wyman.

  • Without investor support for change, bank planning cycles continue to focus on quarterly returns.
  • Investors in banks generally look at technology as IT, focusing on efficiency improvements as opposed to UX, products, and changing value propositions.
  • They’re also concerned about implementation costs.

But the industry is changing.

  • Financial services are becoming more modular, as APIs become more mature. It’s easier to connect products and services from third parties.
  • Many FIs are concerned about making partnerships from a reactive stance, especially with big tech players.
  • One CEO said it took his firm 100 years to get 10 million customers — a deal with a Facebook or Google could easily double that.
  • And banks are concerned about becoming utilities. They don’t want to be relegated to being just dumb pipes.

There’s been little consolidation but regulators are shifting their focus on “too big to fail” firms to “too small to survive” ones.

  • When consolidation starts to heat up, it’s likely new fintech upstarts like challenger banks will be involved.
  • Challenger banks haven’t been through a full economic cycle and as they become more dependent on lending and interchange fees, it’s likely for a shakeout to happen if conditions deteriorate.

To get investors on their sides, banks will need to convince them that digital investments make sense.

  • Long term projects will need to fit alongside short-term ones that more directly impact earnings.
  • Banks will also have to get better at moving good ideas and projects into implementation and discarding poor ones quicker.
  • Overall, banks have an opportunity to improve the narrative of their digital future.

0 comments on “Banks want to invest in their digital futures, investors less so”

New banks

Behind Upgrade’s move to add BNPL capabilities

  • Upgrade is adding BNPL to its personal loans and payment cards, but with a twist.
  • The company also intends to make a push to bring BNPL payments offline and into shops.
Subboh Jaffery | October 08, 2021
New banks

9 insightful things overheard at Tearsheet’s 2021 Convergence Conference

  • Tearsheet's Convergence Conference set the tone on how banks, investment and payment firms, and fintechs are planning their product roadmaps.
  • It's clear that the trend of rebundling the bank will continue, as we see the emergence of super apps.
Tearsheet Editors | September 30, 2021
New banks

‘We’re in a constant beta state’: How Citizens Bank is adapting to the post-Covid needs of young consumers

  • Citizens Bank is targeting a younger demographic of customers with its national, digital offerings.
  • That means rethinking its branch network and upgrading its products and services to match the needs of the modern consumer.
Ismail Umar | September 29, 2021
New banks

Convergence Conference 2021: All session videos

  • Tearsheet's 2021 Convergence Conference looked at how FIs and fintechs are becoming financial super apps.
  • Here are all the session videos from the event.
Shabih Rao | September 27, 2021
New banks

Get access to all the session videos from the Convergence Conference 2021

  • Tearsheet's 2021 Convergence Conference looked at how FIs and fintechs are becoming financial super apps.
  • Here are all the session videos from the event.
Tearsheet Editors | September 27, 2021
More Articles