Euan Davis of Cognizant

A new report from IT services provider Cognizant has shown that traditional banks fear technology giants, such as Amazon and Google, more than fintechs when it comes to loss of market share.
Banks also feel threatened by regulatory change, the political landscape, new competition and emerging technologies, and must understand how all these factors could potentially diminish, displace, disintermediate or destroy their business over the next five years, said Cognizant.
Cognizant found that the Revised Payment Service Directive (PSD2) and open banking reforms are levelling the playfield for ‘new’ entrants. As a result, over half (55%) of digital-first challenger banks and three-fifths (61%) of fintechs feel more confident that they can compete with existing banks. What is worrying, concluded the report, is that incumbent banks seem to be oblivious to this, with only one third (36%) seeing the threats of the new landscape.
Incumbent banks view technology giants such as Amazon, Google and Facebook as a major threat, with over a quarter (28%) predicting that these digital behemoths will be their main competition within the next three years.
In light of the perceived threats from challenger banks, fintechs and technology giants, a subset of incumbents are emerging as “resilient banks”. These banks have implemented advanced automation of data processing across the front office, embedded real-time data analytics to support core business services in the middle and back office, and embraced public cloud solutions.
“The days of traditional banking where barriers to entry were astronomically high are coming to an end, and a drastic mindset shift from the incumbent sector of the industry is needed to resist disruption,” said Euan Davis, European Lead for the Center for the Future of Work. “As regulators level the industry playing field, and technology helps to lower the barriers to entry and change the industry dynamics, European banks need to become ever more resilient. They must redefine their operating and business models for the new competitive environment, rapidly accelerate their adoption cycles for new technology and drastically increase their responsiveness to geo-political change. The new approach from ‘resilient banks’ could serve as the fintech antidote, helping incumbents to adapt and rebuild their models to maintain their competitiveness – whatever the new entrants throw at them.”

by Guy Matthews