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Banks wary of Tech powerhouses

After technology companies, the most significant threat is perceived to come from telcos and from start-ups, as hinted by a recent study

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Pratima Harigunani
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BANGALORE, INDIA: A new report has revealed that more banks in fast growing and rapidly developing markets display greater ambition for becoming innovation leaders in delivering superior customer value. They do this by investing more in research and development, compared to their peers in mature markets.

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Infosys announced the launch of its Innovation in Retail Banking 2014 report. The sixth annual study, commissioned by Infosys and conducted by Efma, surveyed over 100 retail banks around the world.

The study also revealed that banks across the globe, especially from more mature economies, are increasing their innovation investments in 2014 compared to 2013 to keep pace with increasing customer expectations and respond to new market entrants. While new competitors include established technology companies and telcos, there is increasing collaboration with start-up companies to help drive innovation in banks.

Banks in emerging middle income and relatively high growth countries (such as Brazil, India, Malaysia, Russia, South Africa and Turkey) are more likely on average to have an innovation strategy, to be aiming to become innovation leaders, and to be investing in R&D.

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What is interesting to note is that banks are most concerned by the threat from technology companies entering the market (for example Google, Apple and Facebook). The threat from this type of competitor was rated high by 45 per cent of banks and has increased in the last 12 months. After technology companies, the most significant threat is perceived to come from telcos and from start-ups.

As part of their innovation strategies, 26 per cent of banks surveyed are investing in start-ups. Globally, 84 per cent of banks are increasing investment in innovation as compared to 2009, when only 13 per cent of banks increased investment. Also 61 per cent of banks indicated they have an innovation strategy, a significant increase from 37 per cent in 2009.

The study showed that 49 per cent of banks are aiming to be innovation leaders in their markets, whereas 38 per cent of banks are content to be fast followers

Over 70 percent of banks perceive mobile payments and services on multiple devices to be of high importance for delivering customer value in the mobile channel

Patrick Desmarès, Secretary General at Efma added, "This year's global retail banking study indicates more banks are adopting formal innovation practices and developing their approach to open innovation. However, there are still a large number of banks which do not seem to have good basic practices, so there is plenty of room for improvement. Working closely with start-ups is becoming more common and we believe this is a positive trend. Interestingly, it is the banks in fast growing and rapidly developing markets that are still leading the way and showing more ambition.”

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