Temenos outlines challenges and opportunities facing banking

The Financial District of New York City
A new report from Temenos finds payment companies, technology and e-commerce disruptors are competing against banks with embedded finance solutions

Banks must harness disruptive technologies, while creating their own or actively participating in digital ecosystems, to remain at the heart of the banking sector.

That’s according to the results of a new study carried out by Temenos, which commissioned Economist Impact to survey 300 banks based in various locations across the globe. 

The report finds payment companies, technology and e-commerce disruptors are competing against banks with embedded finance solutions. This, coupled with consumers’ growing expectations for better, more personalised products and services, is forcing banks to assess the role they play and how they must adapt.

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Almost four in five (79%) respondents agree banking will become “embedded” in consumers’ lives and businesses’ value chains, while a fifth expect their business model to evolve to offer banking-as-a-service (BaaS) to brands and fintechs, and to enable embedded finance within their own products and services. 

Almost two in five want to retain the consumer-facing experience and act as a true digital ecosystem themselves.

“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,” says Kanika Hope, Chief Strategy Officer at Temenos.

“The case for the public cloud is becoming more apparent; 51% of respondents agree banks will no longer own any data centres due to the move to public cloud in the next five years. Environmental concerns have also joined the list of reasons – business agility, efficiency, security – as to why banks are accelerating the shift to cloud.”

Kanika Hope, Chief Strategy Officer at Temenos

AI expected to have big impact on banking

In a bid to understand emerging trends in the banking industry, Temenos surveyed 300 executives in retail, commercial and private banking spanning North America, Europe, the Asia Pacific region, the Middle East and Africa, and Latin America. 

Respondents worked in various functions including IT, marketing and sales, customer service, finance, strategy and business development, and general management. Half were C-suite executives. 

Crucially, Temenos found new technologies are expected to have the biggest impact on banks over the next five years, more than customer demands and changing regulation, as was emphasised by 63% of respondents. 

In the words of one bank CEO, “if you don’t have modern technology, younger generations will not bank with you; it doesn't matter how long you've been around”.

In a similar vein, 71% of respondents say unlocking value from AI will prove the key differentiator between winners and losers, while a significant majority (75%) expect generative AI in particular to drive banking. 

Jonathan Birdwell, Global Head of Policy & Insights at Economist Impact

“New technology and customer demands are the top two trends expected to impact banking in the next five years,” adds Jonathan Birdwell, Global Head of Policy & Insights at Economist Impact. 

“To maintain their direct connection with the consumer, banks are recognising 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.”

Read the full report – Byte-sized banking: Can banks create a true ecosystem with embedded finance?


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