The answer – according to a new survey from Swiss banking software company Temenos – is yes. But it’s not just alternative finance platforms that have shaken up the financial world. Temenos surveyed 198 senior banking professionals from across the globe. 23% of these respondents consider massive online companies like Amazon and Google to be their greatest threat – whereas only 20% thought that of rival banks.
Many a peer-to-peer lending advocate will be nodding along at the news that 30% of respondents cited a weakening allegiance to the banks among customers as their biggest challenge. Peer-to-peer lenders are one the key groups that are dragging these disillusioned users away from the banks. And the banks are aware of the threat. 67% of respondents to the survey expected IT spending to rise in the near future.
Ridding themselves of cumbersome legacy systems sat at the very top of many of the respondents’ investment priorities. 20% were very keen on developing a more streamlined mobile banking app. 53% felt regulatory pressures were going to force banks to adapt their technology. 74% said that cash point and credit/debit card failures have been a serious problem. And 77% of those surveyed blamed the banks’ inflexible legacy systems for their problems.
Tim Simon, CEO of LendLoanInvest – made the point that “the banks’ ageing technology is failing the test of time” in an early August guest column for AltFi News. According to Tim, the banks simply must modernize – and there are three potential avenues for doing so: invest in overhauling their outdated systems, partner with a major peer-to-peer lending platform, or adopt white-label technology and compete directly with establish P2P operators.
The proliferation of high-growth, agile online finance providers has the banks worried. The Temenos survey appears to convey an acknowledgement from the banks that they are falling way short in terms of technological innovation. And Tim Simon sees the banks responding either by improving their technology in order to compete with the online platforms, or by instead joining forces with those platforms.
An early indication that the latter option might prevail is the partnership that was formed between Santander and Funding Circle in June. We wondered then if more banks might look to follow Santander’s example. Now we’re all the more curious.