About this report

In January-March 2019 The Economist Intelligence Unit, on behalf of Temenos, surveyed 405 global banking executives on the changes they see taking place in their industry to 2020 and 2025, their organisational response, and the longer-term impact on their strategic development. This, the sixth iteration of the retail banking survey, focuses on how these retail banks are incorporating and advancing technology delivery for their current and future customers.

The survey is part of a global research programme on retail banking, which includes in-depth interviews with retail banks, fintechs and regulators from North America, Europe, Africa and the Middle East, Asia-Pacific, and Latin America.

The survey respondents were geographically diverse: 25% were drawn from Europe, 25% from Asia-Pacific, 18% from North America, 16% from Africa and the Middle East, and 16% from Latin America.

Respondents came from a variety of job functions: marketing and sales (18%), IT (15%), and customer service and finance each accounted for about one in ten respondents (9% and 10% respectively). Half of all those questioned occupy C-suite executive or board positions.

In addition, in-depth interviews were conducted with 12 senior executives and experts from regulators, banks and fintech companies. Our sincerest thanks are due to the following for their time and insight.

• Matt Cox, head of open banking, Nationwide Building Society
• Dr Tamaz Georgadze, co-founder and CEO, Raisin
• Dirk Haubrich, head of conduct, payments and consumers, European Banking Authority
• Christoffer Malmer, head of SEBx, Skandinaviska Enskilda Banken
• Sopnendu Mohanty, chief fintech officer, Monetary Authority of Singapore
• Petri Nikkilä, chief commercial and digital officer, Nordea
• Ali Niknan, founder and CEO, bunq
• Nilan Peiris, vice-president of growth, Transferwise
• Melos Sulicich, managing director and CEO, MyState
• Tamara Vrooman, president and chief executive, Vancity
• Colin Walsh, founder and CEO, Varo Money
• Steve Weston, co-founder and CEO, Volt Bank

Executive summary

Globally, retail banking has changed considerably over the past decade. Retail banks have adapted to changing consumer demands and expectations, new technologies (eg, artificial intelligence [AI], blockchain and the Internet of Things), new competitors (eg, neo-banks, payment players and tech giants) and new regulations (eg, open banking and PSD2) while reducing costs and creating value. These combined factors have resulted in retail banks adjusting their business models, rethinking their innovation strategies and investment focus, and altering their product offerings and how they are delivered.

This report, the sixth in The Economist Intelligence Unit’s series on the future of retail banking, marks a significant shift in where banks are focusing their priorities, where they are investing and how they are thinking about innovating for the future.

• New technologies like AI, machine learning and blockchain will have the biggest impact on retail banks in the short (36%) and longer-term (42%). Changing customer behaviour and demands are still important (31%) but less so than in 2018 (58%). Emerging regulation on digital technology and data protection is coming to the fore, with 31% citing this as having the biggest impact in 2020 and 2025.
   
• Open banking and digital banking are the strategic priorities. Long term, the priority is on mastering open banking (30%) and digital engagement (27%), both of which require changes to the business proposition and how each bank’s infrastructure interacts internally and with third parties. The short term focus differs, driven by product agility (32%) and mastering digital marketing and engagement (31%). 
   
• Banks are realising the true opportunities of open banking. More than four in ten (41%) see their business models evolving towards acting as true digital ecosystems. A further 28% expect to maintain their own product offerings and become an aggregator of third-party banking and/or non-banking products. Only 17% want to develop niche propositions.
   
• Retail banks plan to build new digital banks. Although banks’ innovation strategies remain focused on digitisation, open banking and their partnerships with fintechs, they are also looking to build new business units and brands from scratch. The top innovation strategy this year is focused on building greenfield digital banks (36%).
   
• Banks are looking to AI and the cloud. These technologies will allow banks to add new features quickly and build scale when services capture the public’s imagination. Digital investment is focused on cybersecurity (39%), cloud-based technologies (35%) and developing AI-powered digital advisers and voice-assisted engagement channels (29%). Such will be the demand for behavioural data analysis, three in five respondents (60%) foresee banks deploying more computing power in the public cloud by 2025 than they currently deploy in all the private cloud data centres.
   
• Banks are becoming openly innovative. Open bank hub initiatives are on the rise (31%). Investment in fintechs remains popular with 31% of respondents citing this as part of their innovation strategy. Banks are also interested in the security provided by regulatory sandboxes. Moreover, 29% are looking to collaborate with fintechs and other technology providers to test new propositions in regulatory frameworks that encourage innovation and protect customers’ interests. Over half of respondents (56%) believe that fintech-bank collaboration in sandboxes will become mainstream by 2025.
   
• Customer and bank security remain top concerns. Customer online security and fraud (23%) are the biggest challenges banks face concerning data and third-party access. As banks move into an open banking environment, delivering the right products to customers will require banks to be able to address customer concerns around data.