Almost three quarters (74%) of all banks across the UK say they expect to eliminate human interaction from their retail banking services within the next decade, as rapidly evolving customer behaviours and expectations render traditional banking services obsolete.
According to research by leading digital innovator Avanade, almost two thirds (63%) senior IT and digital decision makers from across the UK banking sector recognise that traditional methods of banking are being overtaken by disruptive competition. Over half (51%) admit they’re already facing greater competition from fintech start-ups, but say the emergence of the likes of Amazon, Google and Facebook into the banking sector represents the greatest threat to market share and profitability in the long-term.
A majority (83%) of respondents in the UK accept they are playing catch-up in terms of delivering the type of innovative and personalised digital experience customers are demanding. The majority (77%) agree that in order to remain competitive their organisation will need to increase spending on the customer experience, including:
- Improving personalisation of the customer experience (91%)
- Providing a more seamless experience across multiple channels (72%)
- Closing some or all physical branches to go fully digital (46%)
Caught in a race for relevance, British IT decision makers believe the future survival of the sector hangs on how quickly they can allocate budget to projects which meet increasingly digital consumer demands. Despite placing investment in new technologies at the top of their strategic priorities however, they claim the need to maintain legacy systems – accounting for on average 19% of annual IT budget – is making it almost impossible to direct investment to technologies that will drive the business forward.
Commenting on the findings, Paul Bowen, Banking Lead, Avanade Europe said: “European retail banks are well aware of the challenges they need to address in order to reconnect with customers, but their reliance on legacy IT systems, built up over forty years or more, is acting like a lead weight, slowing them down whilst new entrants, both fintech’s and established technology giants, are streaks ahead.”
Almost all (94%) respondents from the UK believe that modernising their organisation’s IT systems would help them keep pace with digital competitors, reducing operational costs and paving the way for future investments designed to give their organization a competitive advantage.
Paul Bowen added: “Banks must discard their old ways of doing business and invest in technologies which empower their workforce to deliver a more personalised service, and that help build a more seamless engagement with customers across every channel. IT modernisation will form the bedrock for the radical new approach banks must take to safeguard their future. Most recognise that to effect genuine change, they will need third party support.”
Avanade recommends a three-step approach for banks to thrive in the digital world:
- Modernise your legacy IT – address your legacy challenges through application modernization and a move to the cloud, allowing banks to achieve the agility required to serve augmented workforces
- Optimise operations – cut operational costs by deploying machine learning capabilities, predictive models and robotic process automation (RPA), and invest in tools that improve employee efficiency and offer better customer service
- Reimagine the customer experience – create cost-effective, unique and fast-to-market digital experiences for customers, powered by analytics
Find out more about Avanade’s recommendations as outlined in the full report <insert link>:
Bank of England’s Haldane warns inflation “tiger” is prowling
By Andy Bruce
LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, adding that central banks may need to respond.
In a clear break from other members of the Monetary Policy Committee who are more relaxed about the outlook for inflation, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.
“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online.
“But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”
Haldane’s comments prompted British government bond prices to fall and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation.
“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.
(Editing by David Milliken)
BOJ to highlight climate risks as key theme of bank tests this year – sources
By Leika Kihara and Takahiko Wada
TOKYO (Reuters) – The Bank of Japan will for the first time highlight climate change risks as among key themes in its bank examinations this year, sources said, joining major peers moving to gain research clout on the effects of global warming.
In guidelines on the examinations due next month, the BOJ will clarify its readiness to coordinate with Japan’s banking regulator in analysing the impact of climate risks on financial institutions, said three sources familiar with the matter.
The central bank will also beef up cooperation with the regulator, the Financial Services Agency (FSA), in studying European examples and specific ways to measure financial risks associated with climate change, they said.
The moves are part of Japan’s efforts to follow in the footsteps of an increasing number of countries working on or considering stress-testing financial institutions on climate risks.
“For the BOJ, green QE is still off the radar. The more approachable and near-term focus is to assess climate change risks on the financial system,” one of the sources said, a view echoed by two other sources.
“Climate change is a key theme for the BOJ this year,” another source said, adding that stress-testing climate risks on financial institutions is “not imminent, but something Japan needs to aim for in the future.”
The BOJ conducts hearing and on-site monitoring in voluntary examinations on financial institutions. But it does not have regulatory authority, which falls under the FSA. Neither the BOJ nor the FSA stress-tests banks on climate risks.
Officials of the two institutions have been discussing climate change as among topics that could affect Japan’s banking system. But progress toward stress-testing financial institutions has been slow because of a lack of data and models.
The BOJ began to gear up efforts on climate change after Prime Minister Yoshihide Suga last year pledged to make “green” investment a key pillar of his growth strategy.
The Biden administration’s focus on battling climate change, and the Federal Reserve’s decision in December to join an international central banks’ group focused on climate risks, also prodded the BOJ to engage more, the sources said.
But actual roll-out of stress tests will take at least another year as policymakers work out guidelines and details, including whether they will ask banks to conduct a “self-assessment,” the sources said.
(Reporting by Leika Kihara and Takahiko Wada. Editing by Gerry Doyle; Editing by Chang-Ran Kim)
ECB watching yield surge but not controlling curve: Lane
FRANKFURT (Reuters) – The European Central Bank is monitoring the recent surge in government bond borrowing costs but will not try to control the yield curve, ECB chief economist Philip Lane told a Spanish newspaper on Friday.
Yields have soared, particularly over the past week, partly driven by rising U.S. Treasury yields. Verbal intervention by key ECB officials, including ECB chief Christine Lagarde, has failed to stem the rally.
“At this stage, an excessive tightening in yields would be inconsistent with fighting the pandemic shock to the inflation path,” Lane said in an interview with Expansión.
“But at the same time, it is crystal clear that we are not engaged in yield curve control, in the sense that we want to keep a particular yield constant,” he added.
Ten-year Bund yields, a key benchmark for the 19-country euro zone, now yield -0.223%, up from around -0.60% at the start of the year.
Lane added that while inflation is indeed rebounding, the increase was not yet what the ECB was looking for after a decade of undershooting its target.
“What we’re seeing now is not a significant and persistent change in the path of inflation,” he said, arguing that price growth was still too low and required ECB stimulus.
Lane predicted that the bloc would start rebounding from its pandemic-induced slump already in the second quarter and the impact of the current lockdowns would be less severe than a year ago.
(Reporting by Balazs Koranyi; Editing by Shri Navaratnam and Ana Nicolaci da Costa)
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