Report: ‘You Can’t Simply Digitally Enable Your Business as Usual and Expect to be Successful’

NEW YORK/LONDON/HONG KONG–It isn’t just credit unions warily watching emerging competition from fintechs and other players. New research from Accenture says new entrants to the banking market — including challenger banks, non-bank payments institutions and big tech companies — are amassing up to one-third of new revenue, which is “challenging the competitiveness” of traditional banks.

Accenture said it analyzed more than 20,000 banking and payments institutions across seven markets to quantify the level of change and disruption in the global banking industry. The study found that the number of banking and payments institutions decreased by nearly 20% over a 12-year period – from 24,000 in 2005 to less than 19,300 in 2017. However, nearly one in six (17%) current institutions are what Accenture considers new entrants — i.e., companies entering the market after 2005. 

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“While few of these new players have raised alarm bells among traditional banks, the threat of reduced future revenue growth opportunities is real and growing,” Accenture said.

Accenture reported it has published two new reports that quantify the level of disruption in the banking industry: “Beyond North Star Gazing” discusses how industry change is shaping the strategic priorities for banks, while “Star Shifting: Rapid Evolution Required” outlines what banks can do to take advantage of these changes to maintain customer relevance and ensure future revenue growth, the company 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,” said Alan McIntyre, a senior managing director at Accenture and head of its global Banking practice, in a statement. “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.”

Industry Disruption

According to Accenture, many incumbent banks continue to dismiss the threat of new entrants, “claiming that (1) new entrants are not creating new innovations, but rather dressing up traditional banking products; (2) significant revenue is not moving to new entrants; and (3) new entrants are not generating profits.”

However, the reports analyzed where revenue is shifting to new entrants and identifies examples of true innovation happening around the world that can no longer be dismissed, Accenture said, predicting that the shift in revenue to new entrants will continue and will start to have a material impact on incumbent banks’ profits. 

Acdenture Study

United States

In looking at the U.S. market, Accenture said 19% of financial institutions are new entrants and have captured 3.5% of total banking and payments revenues. 

“Over the past dozen years, the number of financial institutions in the U.S. has decreased by nearly one-quarter, largely due to the financial crisis and subsequent regulatory hurdles imposed to obtain a banking license,” Accenture said. “These factors have made the U.S. a difficult market for new entrants and a stable environment for incumbents.”

More than half of new current accounts opened in the U.S. have been captured by three large banks that are making material investments in digital, while regional banks focus on cost reduction and struggle to grow their balance sheets, the report found.

“Ten years after the financial crisis, the banking industry is experiencing a level of competitive intensity and disruption said Julian Skan, a senior managing director at Accenture and global Banking lead, Accenture Strategy. “With challenger banks and platform players reducing traditional banks’ competitiveness and the threat of a power shift looming, incumbent players can no longer rest on their laurels. Banks are mobilizing to take advantage of industry changes, leveraging digital technologies and ecosystem business models to cement their relevance with customers and regain revenue growth.”

United Kingdom

Accenture reported that in the U.K., with regulation increasing competition in the financial services industry and reducing the dominance of established banks, 63% of players are new entrants. 

“This is eye-popping compared with other markets and the 17% global average. New entrants have captured 14% of total banking revenues, with the clear majority (12%) going to non-bank payments institutions,” Accenture said. “While they have only taken around 14% of revenues, the reports suggest that they are taking over one third of new revenue indicating a higher level of disruption in the future. The reports also suggest that incumbent banks will therefore likely start to see a significant impact on revenues as leading challenger banks are surpassing the one-million customer threshold and 15 fintechs have been granted full banking licenses.”


Investors have backed new entrants in Canada with the intention of disrupting the banking industry, according to Accenture. While nearly half (47%) of banking and payments institutions are new entrants, they have captured less than 2% of total banking and payments revenue, making Canada one of the least disrupted major banking markets, according to the analysis.







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Copyright Year: 2019
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