The ability to keep up with the times may literally break the bank if financial institutions choose not to embrace the technological advancements in the sector, particularly as it relates to payments and lending. According to Moody’s Investors Service, banks that are willing to tap into this digital innovation will establish and potentially maintain a thriving customer base.
On April 25, Moody’s reported that competition between banks
will likely rise as some institutions adopt technology and sweep others to the
wayside. Digitalization accentuates the customer relationship through
convenience, personalization and affordability, while maintaining privacy and
data security. Competition will also be prevalent between banks, big technology
companies and small fintechs, the report added.
“In the face of these threats, successful incumbent banks
will be those that, either on their own or in collaboration with others, pursue
aggressive digital transformation to become more efficient and responsive to
evolving customer demands,” Moody’s Analyst Fadi Abdel Massih, who co-wrote the
report, said in the release. “Disintermediation of the customer relationship
would be a threat to this business model if it ends up reducing banks’ pricing
power by transforming them into providers of a ‘back-office’ balance sheet for
Although investment is a possible concern among incumbent
banks, Moody’s noted that technology can enhance banking branch networks, data
collection, analyses and reporting.
-Andrew Michaels, editorial associate