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Retail banking will be fully automated by 2020, say bankers

Financial services employees believe the future of customer retail banking will be automated as the need for digital technology increases

More than half of retail banks believe their services will be fully automated over the next four years.

A study by Temenos and Economist Intelligence Unit found 64% of financial services personnel think retail banking will be fully automated by 2020, cutting out the need for branches.

Monica Woodley of the Economist Intelligence Unit said: “The digital revolution has moved from existential threat to potential survival strategy for the world’s retail banks and strategically banks have a number of responses. The correct path is not yet clear-cut.”

Automation has been a hot topic throughout the banking industry following the Financial Conduct Authority’s suggestion that guidelines should be introduced for banks investing in “robo-advice” services – online forms which suggest services and products to customers, based on the information they enter.

Increasing use of these services is changing the bricks-and-mortar banking landscape, as well as causing internal structural changes such as redundancies of face-to-face product advisors.

More than 60% of bankers also think peer-to-peer lending will be offered on banking platforms in the future, and 57% believe more money will be moved through finance technology (fintech) firms than traditional banks.

Technologies such as Apple Pay and Android Pay are growing, and the younger generation of customers are quick to adopt products and services provided by fintech firms.

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Legacy and recruitment worries

A quarter of respondents said entrants to the market are a significant threat to the retail banking industry, alongside changing customer habits and the introduction of disruptive technology.

In addressing the increased competition from smaller, innovative fintech firms, 31% of bankers believe retail banks need to modernise their technology; and 36% believe more work should be put into adapting the role of the branch network.

David Arnott, chief executive officer at Temenos, says: “Last year we found that regulation and compliance were receding as threats. This year we can see that that trend has accelerated. The banks’ response is to look at ways of beating the fintechs at their own game. This may be partnering or co-operating with service providers, or investing in their own digital platforms.”

But legacy systems often prevent banks from introducing new technologies which will not interact with their back-end software.  

Recruitment was also cited as a problem banks are facing and 35% of respondents thought getting people will the right skills will be more important for retail banks in the future.

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