“Digital” is an oft-repeated mantra in banking that in only a few years has moved from the periphery to the core of most bank’s strategic agendas. Europe’s 20 biggest financial institutions mentioned “digital” an average of once per annual report in 2011, a number which increased to 55 mentions by 2016.
If you ask the banks, most of them consider themselves leaders when it comes to digital. Yet they have not all taken the digital mantra on board. So what is the reality?
Until now, we have been lacking objective data about how each bank is positioned in respect to its digital offerings, data that compares apples to apples by taking into account the full spectrum of banking products and functionalities, and maps them against consumer preferences in each market.
That’s why Deloitte member firms across EMEA recently teamed up to conduct the most comprehensive and objective digital maturity study to date. Deloitte teams analyzed 238 banks and 10 FinTechs across 38 countries, comparing them on 826 functionalities, and mapped their performance against customer preferences derived from over 8,000 interviews.
The result of all this comprehensive analysis is the Deloitte EMEA Digital Banking Maturity Study. It has uncovered a number of surprising findings and should serve as a digital playbook for any bank looking to come out as a winner in the new post-PSD2 world of banking.
1. Digital champions are few and far between
Digital champions are the banks that provide a broad variety of digital functionalities to their customers, meet or exceed customer preferences in their market, and deliver a modern and intuitive mobile UX.
Out of 38 countries, the study found digital champions in Poland, Russia, Spain, Switzerland, and Turkey. The majority of EMEA’s banks were digital adopters, some way off the top rankings.
It takes a lot to be a digital champion in the eyes of consumers, and few banks are able to do it at present. In fact, there are many markets where incumbent banks are simply not yet delivering the level of digital services that customers are asking for—making them targets for new entrants and FinTechs in the post-PSD2 landscape. More on this later.
2. The local environment creates digital champions
Contrary to popular belief, it is not visionary leaders that create digital champion banks. Nor is it connected with country size (population), economy size (GDP), wealth (GDP per capita), or access to internet banking.
What creates EMEA’s banking digital champions is a mix of environmental pressure from customer preferences and market pressure from competitors.
But today’s digital champions are not guaranteed to be the digital champions of tomorrow.
3. PSD2 has the potential to disrupt the banking landscape in many markets
Remember how some incumbent banks aren’t able to deliver the digital services that their customers are asking for? On the flip side of that, there are markets where incumbent banks are over-delivering on digital services because they have chosen to use digital as a key differentiator.
What happens when PSD2 removes national barriers between banks, and all of a sudden a digital champion from one market can enter another market that has digitally weak incumbents?
You guessed it. EMEA’s banking landscape could be set for a reshuffle. And who comes out on top will be determined by which banks embrace the future of banking first: Open Banking and Beyond Banking.
4. The digital champions of today aren’t guaranteed to be champions tomorrow
In analyzing 238 banks and 10 FinTechs in 38 countries across EMEA, we found that the majority of banks are focusing primarily on Digitization—the transformation of traditional banking products and services from brick-and-mortar to internet and mobile.
But we are seeing digital champions taking the first steps toward investing into the new world of Open Banking and Beyond Banking, as defined by Deloitte’s Bank of the Future framework.
Data shows that most digital champions are also leaders in both expanding their traditional banking products and services with new value-adding services, mostly delivered by third parties (Open Banking), and introducing new financial value-adding services delivered by third party providers into their banking digital channels (Beyond Banking).
Maintaining a competitive edge in Open Banking and Beyond Banking will be critical for the digital champions of today eager to retain their place at the top, and will primarily determine the digital champions of the future.
5. Every bank needs objective data to make strategic decisions about how to move forward in the post-PSD2 world
For banks, surviving and thriving in this new era will take a complete understanding of their competitive landscape, encompassing how their functionality compares to their competition as well as how they measure up to customer preferences.
Banks need data to create a game plan for the post-PSD2 banking world, especially if they want to gain market share or, at the very least, to defend their position from attack by new market entrants or FinTechs.
Deloitte’s EMEA Digital Banking Maturity study provides a comprehensive picture of the market and where banks stand relative to their competitors in the digital space. As such, it is an essential ingredient for any bank’s strategic planning in the post-PSD2 world of open banking.
How well prepared are you for the post-PSD2 world? Do you think your bank is a digital champion or a digital latecomer?
Pascal Martino, Partner, Banking Leader & Deloitte Digital Leader in Luxembourg
Ronan Vander Elst, Partner, Deloitte Digital Luxembourg
Xavier Turquin, Ideator, Deloitte Digital Luxembourg