European banks are actively embracing innovation to stay competitive against fintech challengers, according to a recent report by Economist Impact, supported by Temenos. This study reveals that nearly half (43%) of European banks are investing in fintech startups, while a significant portion (36%) are taking the initiative to create their own digital banks or fintech companies.
Cloud, SaaS, AI, and Digital Transformation
One key strategy European banks are employing to maintain agility and security in their operations involves migrating their core banking systems to the public cloud and Software as a Service (SaaS). This move is more pronounced among European banks than their global counterparts, with over 21% identifying the cloud as a strategic priority.
The adoption of artificial intelligence (AI) plays a crucial role in these banks’ technological strategies, particularly in enhancing customer experience and supporting digital marketing efforts. An overwhelming 75% of European bankers anticipate that generative AI will significantly impact the banking sector, signaling a strong commitment to incorporating advanced technologies into their services.
Facing Competition With Collaboration
European banks regard neobanks as their main competitors in the coming years, more so than in other regions. However, the presence of payment players and technology providers remains a significant consideration. European banks predict that these new entrants will primarily gain market share in the payments domain, prompting traditional banks to launch innovative solutions like HSBC’s Zing app to compete directly with fintech offerings.
But despite the competition, the trend among banks is toward collaboration. By investing in startups, creating banking super-apps, and providing banking-as-a-service offerings, these banks are leveraging open banking opportunities to enhance their service range and customer experience.
