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Incumbent banks view tech giants as major threat, suggests report

Euan Davis, European Lead for Cognizant’s Center for the Future of Work

Incumbent banks view tech giants such as Amazon, Google and Facebook as a major threat, with over a quarter predicting that these companies will be their main competition within three years, new findings have revealed.
Technology consultancy Cognizant conducted research into the major threats facing the banking industry, analysing responses from 300 European banking executives to establish the perceived impact of factors including new competition and emerging technologies. The research’s aim was to understand perceptions of how these factors could diminish, displace, disintermediate or destroy incumbent business over the next five years.
Despite incumbent confidence about competitiveness with fintech firms, 45% fear they may lose strategic advantage in consumer lending due to the rise of peer-to-peer funding. But over three-quarters (77%) agreed that incumbents’ access to consumer data is still an advantage over challengers. A subset of incumbents are emerging as ‘resilient banks,’ embracing advanced automation and data processing, said Cognizant.
“The symbiosis between the few big banks that make up most of the EU market and the fintech firms challenging them is constantly changing,” said Euan Davis, European Lead for Cognizant’s Center for the Future of Work. “However, companies such as Nutmeg are making significant progress in providing customers with viable alternatives, not only for current accounts but more lucrative services, such as wealth management and investment advice. Elsewhere, digital-orientated outfits are raising expectations for rapid customer experience and transparency with a newer, more agile breed of organisation that has been poaching market share for some time. So, what are incumbent banks doing about it?”
Davis acknowledged that there are players outside the financial start-up arena that are challenging the status quo: “Technology giants such as Amazon, Google and Facebook have joined the fray, as demonstrated by initiatives such as Facebook Messenger Payments,” he said. “In fact, the report highlighted that over a quarter of traditional banks predict these big tech firms will be their main competition within the next three years, rather than fintechs. Banks really are having to fight for survival on all fronts.”

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