As the competitive metabolism of the banking industry starts to increase, the survey shows that banks are taking change increasingly seriously. They are currently investing in all aspects of change, with 53 percent expecting to increase their investments over the next 12 months, averaged across all programs. A variety of factors are driving these investments (Figure 1). The most important change investment priorities for the industry are:
• Efficiency and cost control
• Customer service and experience
• Risk and regulatory compliance
• Digital technology and channels
In many banks these investment priorities are tightly interwoven, as new digital technologies are used both to improve the customer experience and lower the cost to serve. Cost reduction is currently a priority for most banks and is the investment category most likely to increase over the next twelve months. This is indicative of some of the short-term pressures on the industry and the stubbornly high cost / income ratios faced by most incumbents in mature markets. Without material change they will struggle to close the gap between themselves and the pure digital banks that have few fixed assets and low running costs.
Unsurprisingly, risk and regulatory compliance is another change priority. Eighty-six percent of banks are investing in it now, with 55 percent expecting to increase their investment. Eighty-five percent of executives believe their strategic change portfolio is inhibited by the need to invest in regulatory change. While this is true, the regulations do serve to protect the incumbents. In the UK, for instance, a number of new banks have acquired banking licences but large entrants from other industries – especially the GAFA (Google, Amazon, Facebook and Apple) – do not want the regulated balance sheets, FS returns on equity or individual executive accountability (including personal liability) that come with being a bank. Despite the burden of mandatory change, 84 percent of banks currently invest moderately or significantly in new digital technologies and channels, and 61 percent expect to increase their investment soon. Among the digital technologies rated as most important for transformation are big data and analytics and mobile banking, closely followed by cloud, social, the digital ecosystem, blockchain and robotics (Figure 4).