Big-tech yet to seize its banking prize as industry predicts traditional banks will continue to dominate in 2030
PA Consulting, the consultancy that’s bringing ingenuity to life, has today launched a new report setting out a 2030 view of the retail banking market, supported with research from 600 business leaders across full-service and specialised companies in banking and technology.
According to the report, Vision for banking: a force for future good, just over two-thirds of business leaders (69 percent) expect traditional banks – in one form or another – to dominate the industry in 2030, despite predictions of big-tech taking over. Encouragingly, trust is presented as a critical factor, with 65 percent of survey respondents believing that banks enjoy a customer trust advantage over technology companies.
However, the increasing influence and growing market share of big-techs will force banks to accelerate the digitalisation of their business models to remain competitive. Unless they can compete head-on with big-techs, banks will come under growing pressure. As a result, 71 percent of leaders in the UK expect traditional banks to act as customer facing operations, with other players driving the back-end operations.
Jason Hill, head of banking, PA Consulting, said: “Banks are dealing with a tidal wave of priorities in times of uncertainty, but they need to keep an eye on an ever more fragmented market. We are heading into a decade of divergence which could see retail banking break away decisively from the certainties and assumptions of the past.
“Banking leaders can better future-proof their organisations against the uncertainty that lies ahead, ensuring that their hard-earned trust isn’t compromised. Investment in accelerating their business to meet evolving customer demand, and ultimately market share, will be vital for traditional banks, as new entrants willing to compromise revenue for growth in the short-term will seek to entice their existing customers and grow their base.”
Other key findings include:
- Incumbents can benefit from a smart, flexible, and forward-looking approach to regulation. 64 percent think new regulation is needed to reflect the use of technology and data. Innovation is running ahead of regulation, according to 52 percent of banking leaders, leaving customers vulnerable to potential risk
- Banks prioritise ESG more than tech firms and have a stronger belief in the ability of finance to support sustainability. Banks cannot afford to fail to prioritise this issue as social and environmental risks are seen as among the gravest long-term threats to banks
- Talent management will be key to banks’ ability to future-proof their skills mix. Only 52 percent of big bank leaders believe strong employee engagement is important, compared to 70 percent of niche bank leaders. This puts them at a disadvantage to their big-tech competitors who have a strong track record of attracting best-in-class talent.
PA used scenario modelling to assess the banking landscape in 2030. The report offers insights on how retail banking leaders expect to plan, respond, and innovate amid ongoing industry disruption to ensure they remain competitive. The report assesses the influence of increased fragmentation and the associated threats and opportunities through its ‘FutureWorlds™’ methodology.