Digital-only banks, fintechs and big tech companies are gradually corroding away the customer base as well as revenue of the high street traditional banks, putting their revenue growth at risk, according to a study by Accenture.
The report reveals that the new entrants to the banking market such as challenger banks, non-bank payments institutions and big tech companies, are garnering up to one-third of new revenue.
Accenture evaluated over 20,000 banking and payment firms across seven markets to enumerate the level of change and disruption in the global banking industry.
The report found that the number of banking and payments institutions decreased by almost 20% over a 12-year period from 24,000 in 2005 to less than 19,300 in 2017.
Accenture termed companies entering the market after 2005 as new entrants, which have raised alarm bells among traditional banks, as the threat of reduced future revenue growth opportunities is real and looming large.
Accenture senior managing director and head of its global banking practice Alan McIntyre said: “Most banks are struggling to find the right mix of investments in traditional and digital capabilities as they balance meeting the needs of digital customers with maintaining legacy systems that protect customer data.
“Banks can’t simply digitally enable their business as usual and expect to be successful. So far, the conservative approach to digital investment has hindered banks’ ability to build new sources of growth, which is crucial to escaping the tightening squeeze of competition from digital attackers and deteriorating returns.”
Traditional banks are in denial of the threats posed by the new entrants though, the reports evaluated where revenue is shifting to new entrants and recognised instances of true innovation happening around the world that can no longer be dismissed.
Accenture has forecast that the shift in revenue to new entrants will continue and will start to have a significant impact on incumbent banks’ profits.