Banks not Adapting to Digital Transformation Quick Enough

Majority of banks shy away from modernizing their IT architecture

Many German banks are not sufficiently preparing for digital transformation. On the one hand, most managers realize the urgency of the issue—55 percent of all executives believe that a lack of digitalization efforts could cost their institution at least 10 percent of revenues in just a few years’ time. On the other hand however, banks remain hesitant to implement concrete measures. The “digital pulse check” study conducted by zeb, one of the leading European strategy and management consultancies in the financial sector, shows for instance that only one in five institutions sees an especially urgent need for action with regard to overhauling their IT architecture.

“We would have thought that banks were actively driving the modernization of their IT forward, especially with regard to the integration of cooperation partners into their own portfolio of products and services, as those who wait too long are bound to fall behind sooner or later. Therefore we were surprised to see this hesitant attitude”, explains Dr. André Ehlerding, a Partner at zeb and initiator of the study. In total, around 250 executives from all banking sectors took part in the survey conducted at the end of 2015.

“Yes” to online contract conclusion, “no” to comparison sites

Top managers give the highest priority to their bank’s website—almost two thirds of respondents feel that they will need to improve their Internet presence in the near future. The same applies to the adjustment of traditional sales structures. For instance, 57 percent of executives regard the reduction of branches or the expansion of alternative sales channels as urgently required. This matches the fact that 61 percent of respondents intend to improve the ability to conclude contracts for standard products online.

By contrast, many bankers regard the use of comparison sites as well as the topic of banner advertising as irrelevant—only 7 percent of respondents expressed high levels of agreement in these areas. “I would wish for a lot more open-mindedness in this context. We know from our projects just how useful the intelligent integration of comparison sites can be. Institutions are neglecting an increasingly significant sales channel,” says Ehlerding.

With regard to fintech, most banks are also biding their time

Most banks are also biding their time as far as cooperations with fintech companies are concerned—only one in seven respondents sees this as a priority issue. Nevertheless, most executives believe that these newcomers will in the short term become relevant in payment transactions, settlement and infrastructure as well as big data and scoring. Online asset management (aka robo-advice) is however of no importance for most executives in the near future—a danger from zeb’s point of view as this innovative technology could become significant for the retail business more quickly than many bankers think.

All in all, Mathias Gans, Senior Manager at zeb and author of the study, believes that “German banks have fundamentally realized how important the digitalization of their business models is. However, they are avoiding particularly challenging fields of action with customer-orientation and IT focus. We argue the case for addressing the mega trend of digitalization more comprehensively. After all, banks as we know them today will no longer exist in the long run.”

zeb is a strategy and management consultancy specializing in the financial services sector. The company currently has 15 offices in Germany, Austria, Denmark, Italy, Luxembourg, Norway, Poland, Russia, Sweden, Switzerland and Ukraine. With more than 900 employees and a turnover of around 180 million euros in 2015, zeb ranks first in Germany and is one of the leading European consulting firms for banks, savings banks, insurance companies and other financial institutions.