Banks MUST Go Digital or Die Trying as they Face-Down Fierce Competition from Payment Companies and Big Tech!
North American banks are lagging EU and Asian counterparts.
This is a great survey of bank digital tech sponsored by temenos and written by Economist Impact. While temenos focuses on the North American market, which it states clearly is lagging in the digital space, I think that the most interesting part is how the different regions view their competition!
New Tech’s Impact
Figure 1: New tech will have the biggest impact on banking according to the survey. Simple right? STOP and look at Mid-East and APAC at the figures for customer behavior. Note for developing markets the concerns are very different.
THE CHALLENGERS SHOW THE FUTURE
FIGURE 3: This chart shows who is the most fierce competitor in each region. I think it is the most important chart in the report because it shows the future. I’ll analyze this chart in the takeaways….
👉TAKEAWAYS (all focused on Figure 3 above)
Banks have no choice but to go digital or face withering competition. Figure 3 shows the impact of big tech and payment companies on banks across the globe.
Look how big tech and payment companies are the primary concern in LatAm, APAC, MEA, and the EU, or tied with big tech!
This result is key because it shows how payment innovations in these regions disrupt banking services far more than big tech.
Now contrast this with NA banks, where big tech is considered the major disruptor.
So why does this chart show the future? NA Banks are spending so much on tech, not because they worry about being behind their EU counterparts but because big tech terrifies them!
This chart also shows another problem: payment markets in NA are not evolving as fast as in other regions, so banks don’t view them as a threat.
Another key indicator on this chart is how neobanks are coming on strong globally, particularly in the EU!
I loved this report, and I hope you enjoy it too! While I salute temenos and Economist Impact for focusing on the NA market, there is far more in this report on an international scale.
For me, this report was not solely about NA banks, though I laughed that the first line of the report said:
“North American banks have lagged behind their European and Asian counterparts in adopting modern technology.”
This report's key is that it hints at how finance and banking will evolve in different regions.
Throughout APAC and LatAm, payment systems are the primary threat to banks. Both of these regions are looking at a future like China’s, where payment and banking are blurred. That future may be easy to envision for APAC, but it’s also coming to LatAm through Brazil’s PIX and the ubiquitous MercadoLibre.
Contrast this with the NA bank market, where alternative payment systems like PayPal exist but are still small compared to banks’ market share.
NA payment systems are not evolving as quickly as their competitors in APAC or neighboring LatAm. The main reason for this is that banks have a regulatory lock on the payment business and block innovation in the sector.
This points to a future where NA’s payment systems become second-tier and are leapfrogged by other regions.