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Economist Impact Research for Temenos Shows Banking is Becoming Byte-Sized with Rise of Embedded Finance

Banks must harness disruptive technologies and create their own or actively participate in digital ecosystems to remain at the heart of the banking universe, according to a global Economist Impact study, commissioned by Temenos, which surveyed 300 banks across the globe.

The report, “Byte-sized banking: Can banks create a true ecosystem with embedded finance?” finds that payment companies, technology and e-commerce disruptors are competing against banks with embedded finance solutions. Coupled with consumers’ growing expectations for better, more personalized products and services, this is forcing banks to assess the role they play and how they must adapt.

Almost four-in-five (79%) of survey respondents agree that banking will become “embedded” in consumers’ lives and businesses’ value chains. One-in-five banks in the survey expect their business model to evolve in the coming years to offer banking-as-a-service (BaaS) to brands and fintechs and enabling embedded finance within their own products and services. Nearly twice as many want to retain the consumer-facing experience and act as a true digital ecosystem themselves.

Jonathan Birdwell, Global Head of Policy & Insights, Economist Impact, said: “New technology and customer demands are the top two trends expected to impact banking in the next five years. To maintain their direct connection with the consumer, banks are recognizing that they must become true digital ecosystems. Customer centricity will also drive banks to offer more embedded ESG and sustainable banking propositions to their customers in the future.”

Kanika Hope, Chief Strategy Officer, Temenos, commented: “Banks need to tap expertise in new technologies like cloud and AI as well as collaborate with fintechs and technology companies to offer embedded finance as well as to build digital ecosystems. The case for the public cloud is becoming more apparent, 51% of respondents agreeing that banks will no longer own any data centers due to the move to public cloud in next five years. Environmental concerns have also joined the list of reasons— business agility, efficiency and security—why banks are accelerating the shift to the cloud.”

New technologies are expected to have the biggest impact on banks in the next five years, more than customer demands and changing regulation, according to 63% of respondents. “If you do not have modern technology, younger generations will not bank with you, it doesn’t matter how long you’ve been around,” according to a bank CEO quoted in the report. 71% of respondents say unlocking value from AI will be the key differentiator between winners and losers with generative AI in particular expected to drive banking by 75% of respondents.

Collaboration with fintechs or other technology providers is key to accessing expertise in emerging technologies. Against this backdrop, banking executives surveyed foresee relationships within the industry evolving over the next one to three years. As many as 44% of survey respondents believe that banks will acquire majority stakes in fintechs and 32% believe that there will be market consolidation among challenger banks in the next one to three years.

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  1. Gemini Launches Staking and Derivatives for EU Customers Read more
  2. Pave Finance, an AI-Powered, Institutional-Grade, Personalized Wealth Management Software Company Raises $14m in an Oversubscribed Seed Financing Read more
  3. ebankIT to Unveil Industry’s Leading AI Transactional Banking Assistant Using Agentic AI at FinovateFall 2025 Read more
  4. Varo Bank to Accelerate Responsible and Customer-Focused AI Efforts with New Chief Artificial Intelligence Officer Asmau Ahmed Read more
  5. Tangram Taps INSTANDA to Accelerate Launch of Fully Customizable E&S Insurance Product for Security Guard Industry Read more
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