2022 Global Banking Benchmark Study
The inside story from 1,000 senior banking leaders
The Global Banking Benchmark Study is part of an ongoing programme of research on the latest digital transformation trends in Financial Services. To access more reports, articles, and case studies from our teams around the world, visit www.publicissapient.com/fs
CONTENTS
- Executive Summary
- Transformation Progress, but Not at the Required Pace
- Improving the Customer Experience: A Top Priority
- High Interest in Modern Core Banking Systems
- The Operational Agility Imperative
- The ESG “Say-Do” Gap
- Conclusion
- About the Research
EXECUTIVE SUMMARY
This year’s Global Banking Benchmark Study, based on a survey of more than 1,000 senior executives at banks around the world, reveals that banks are aggressively gearing up for the next phase of digital transformation. After making only moderate progress in the past 12 months, banks are refocusing on operational agility by investing in new technologies, enhancing their data use, and reorganizing their internal structures.
KEY FINDINGS
- 54% are yet to make significant progress on executing their digital transformation plans (see section 1).
- 36% are combining customer data across different systems, making it the top method of improving customer experience (see section 2).
- 37% say modern cloud-based core banking systems are the top priority for transforming operations, likely because legacy systems prevent meaningful improvements in customer experience (see section 3).
- 61% say that rapid, fundamental change, rather than incremental progress, is needed to achieve their digital transformation objectives (see section 3).
- 20% report having a fully agile operating model; a lack of operational agility is cited as the second-greatest barrier to digital transformation (see section 4).
- 61% feel significant pressure to address ESG risks, but only 31% have implemented ESG sponsorship and oversight at board level (see section 5). There is a clear gap between intention and action.
1. TRANSFORMATION PROGRESS, BUT NOT AT THE REQUIRED PACE
This year’s survey shows that respondents have progressed with their transformation initiatives, yet bank leaders are still feeling the competition from non-bank industry disruptors such as large technology companies and fintechs.
- Transformation leaders: 2021: 14% | 2022: 22%
- Customer champions: 2021: 8% | 2022: 10%
- Operational evangelists: 2021: 8% | 2022: 11%
- Slow starters: 2021: 70% | 2022: 57%
What defines banking leadership?
Today, banks need to deliver superior customer experiences while being operationally agile to drive growth and compete with digital-first challengers and new tech entrants. The Global Banking Benchmark Study ranked the digital transformation maturity of leaders by assessing specific traits and behaviors of both customer and operational leadership.
Customer Leadership (Traditional Banks):
- Have established a customer-led culture
- Have a 360° view of customer data
- Adopt a platform-based approach
- Deliver omnichannel servicing
- Offer personalized experiences and products
Operational Leadership (New Banking Leaders):
- Operationally efficient/lower cost:income ratio
- Have depth and breadth of talent
- Embraced automation at scale, AI/ML, and cloud
- Established networks of fintechs and tech partners
- Use agile tools and services
The majority say they have yet to make significant progress on executing their digital transformation plans. Top barriers include:
- The Covid-19 pandemic: 36%
- Lack of operational agility: 31%
- Regulatory challenges: 31%
- Failure of past digital investment: 30%
- Lack of unified strategy/investment across business functions/leadership: 29%
- Lack of workforce skills or willingness to embrace change: 28%
- Legacy technology: 27%
- A lack of technology expertise at board level: 26%
- Lack of access to data: 24%
- Lack of budget: 19%
WHICH QUALITIES DO BANKS FEAR IN THEIR COMPETITORS, AND HOW ARE THESE SHAPING THEIR DIGITAL TRANSFORMATION STRATEGIES?
- Increased competition from direct competitors: 1st: 16%, 2nd: 14%, 3rd: 14%
- Changing customer expectations: 1st: 14%, 2nd: 16%, 3rd: 12%
- Increased competition from consumer tech companies, telcos, or online retailers: 1st: 16%, 2nd: 14%, 3rd: 12%
- Increased competition from digital-first challengers and/or fintechs: 1st: 17%, 2nd: 15%, 3rd: 10%
- Increased competition from traditional financial services firms that are not banks: 1st: 14%, 2nd: 15%, 3rd: 10%
- Changing employee expectations: 1st: 12%, 2nd: 13%, 3rd: 12%
- The COVID-19 pandemic: 1st: 11%, 2nd: 11%, 3rd: 12%
Qualities most feared in competitors:
- Ability to attract and retain the best talent: 34%
- Innovative products and services: 34%
- Advanced technology and/or capabilities: 33%
- More able to meet customer needs: 32%
- Innovative business models: 32%
- Increasing market share: 31%
- Innovative and agile culture: 30%
- Superior customer experience: 29%
- Superior efficiency: 28%
2. IMPROVING THE CUSTOMER EXPERIENCE: A TOP PRIORITY
Survey respondents cite improving customer experience as their most important digital transformation goal. To achieve this, banks are:
- Combining customer data across different systems to obtain a richer understanding of their customers and their relationships: 36%
- Offering new financial services and products: 35%
- Personalizing customer journeys: 33%
- Community engagement: 32%
- Omnichannel servicing to enable seamless customer journeys: 31%
- New distribution channels for traditional products and services: 31%
- Branding and marketing: 29%
- Enhanced performance tracking: 28%
- Offering new non-traditional financial services and products: 28%
Biggest opportunities to improve customer experience:
- Personalizing experiences: 70%
- Innovating core products and services to capture new and existing customers: 71%
- Offering new products and services that go beyond traditional financial services: 74%
- Offering traditional products through new distribution channels: 69%
- Enhancing customer servicing: 68%
- Optimizing customer experience: 69%
85% of C-level execs say customer experience is a key metric, compared with just 55% of senior managers.
3. HIGH INTEREST IN MODERN CORE BANKING SYSTEMS
Banks plan to revamp their internal operations to facilitate the necessary step change in customer experience, drive efficiencies, and cut costs. Their top priority for the next three years in operational transformation is investing in modern cloud-based core banking systems.
Top priorities:
- Modern cloud-based core banking systems: 37%
- Intelligent technologies (e.g., AI/ML/RPA): 34%
- Data and/or analytics to obtain a richer understanding of customers: 33%
- Agile capabilities (e.g., cross-functional collaboration, decentralized structures): 31%
- Existing talent development (e.g., upskilling, reskilling): 31%
- New talent development (e.g., hiring digital skill sets): 31%
- Organizational culture and/or mindset to embrace change: 29%
- Cloud infrastructure and/or migration: 29%
- Partner networks or ecosystems: 28%
Attracting and retaining banking talent with the right skills is crucial. Beyond technical skills, banks look for a strong sense of ownership, curiosity, empathy, and a data-driven mindset.
C-suite vs. Senior Management perspectives:
- Improving cost to run/serve: C-level 62%, C-level-1 45%
- Improving cost/speed of change: C-level 67%, C-level-1 44%
- Deploying new technologies: C-level 64%, C-level-1 43%
- Implementing data and/or analytics: C-level 65%, C-level-1 47%
- Establishing partner ecosystems: C-level 63%, C-level-1 43%
- Developing new talent: C-level 63%, C-level-1 45%
- Developing existing talent: C-level 63%, C-level-1 43%
Partnerships are challenging to forge but bring huge benefits. Technology integration is not the only problem; potential partners may be reluctant to share data due to privacy concerns or the value they place on their data.
4. THE OPERATIONAL AGILITY IMPERATIVE
Banks rank a lack of operational agility as the second-most significant barrier to digital transformation in the past 12 months, behind only COVID-19. Agility includes having the technology and data that enable urgent change, collaboration between teams, and a culture that promotes experimentation and adaptability.
With agility, banks can scale at speed and deliver better products and experiences for customers.
Agile operating model adoption:
- Total: 20% have a fully agile operating model; 37% have agile in places; 41% have started to implement some aspects
- C-Level: 45% fully agile; 35% agile in places; 19% started to implement
- C-Level 1: 9% fully agile; 38% agile in places; 51% started to implement
Biggest opportunities to improve operational agility:
- A more customer-centric approach to innovation: 30%
- Greater investment in cloud infrastructure and cloud-based technologies: 29%
- Greater technology and customer experience expertise at board level: 27%
- A more agile approach to product development/service innovation: 27%
- Expanded partner networks/ecosystems: 27%
- Improved access to data and/or analytics: 27%
- Greater investment in intelligent technologies: 26%
- Replacing traditional banking skill sets with new digital skills: 24%
- Greater cultural acceptance and mindset for disruption: 24%
- Increased cross-functional and leadership collaboration: 23%
- Increased ambition and buy-in amongst senior leadership: 22%
IMPROVING DATA ACCESS ACCELERATES BANKING TRANSFORMATION
Banks are investing in data and analytics to obtain a richer understanding of their customers and their relationship with the bank. However, many banks still struggle to access the data they need, when they need it, and in a usable format. This is a significant barrier to transformation, as it limits the ability to personalize customer experiences, innovate, and drive operational efficiency.
Banks that have made the most progress in their digital transformation journeys are those that have invested in modern data architectures and platforms, enabling them to break down silos and make data available across the organization. This allows for real-time insights, better decision-making, and the ability to quickly respond to changing customer needs and market conditions.
Common data challenges:
- Difficulties extracting and combining siloed data in a timely fashion
- Lack of trust in the provenance of customer data
- Inconsistent, missing, or poorly documented data taxonomies, classifications, and standards
- Lack of available people with the right experience and skillsets
- Lack of clear ownership and accountability for creating customer insight
- Lack of knowledge about which customer data exists and where
- Incomplete or poor-quality internal customer data
- Data security, privacy, and ethical concerns
- Lack of technology and platforms to process, analyze, and visualize data
- Lack of external customer data
RETHINK TEAM STRUCTURES TO PROMOTE DIGITAL BANKING TRANSFORMATION
Most banks are structured in a traditional vertical fashion, with individuals working in discrete business functions or on specific products. This legacy structure can often prove inefficient for digital banking transformation. Internal processes often span multiple teams, meaning no one group is accountable for customer outcomes or improving customer journeys. Customers may have multiple products and relationships with a bank that span multiple teams, so improving customer experiences requires a joined-up approach.
An alternative is to create teams-of-teams focused on improving a particular customer journey, such as opening a new bank account or applying for a mortgage. These teams should incorporate individuals from the back and front office and across multiple functions, meeting regularly to discuss progress on key initiatives. These “end-to-end” teams can deliver change much more rapidly because all necessary stakeholders are involved from the outset. In times of intense competition, reduced time to market is a key differentiator.
Encouragingly, 63% of banks plan to structure their teams around specific customer segments. Such teams will have a more holistic view of their customers and, therefore, be better positioned to improve the services they offer.
In an even more radical approach, some banks have decided to isolate their transformation team completely from the wider business to free themselves from outmoded approaches to change and innovation. One example is SEB, which launched an innovation studio, SEBx, in 2018.
PUT CUSTOMERS AT THE CENTER OF INNOVATION
Banks are investing in capabilities that directly address customer needs, even if they seem traditional or non-profitable, because customer demand drives innovation.
5. THE ESG “SAY-DO” GAP
More than half of banks report that they feel significant pressure to improve their ESG (environmental, social, and governance) credentials; this rises to 61% of surveyed C-level executives. This pressure comes from multiple sources, including customers and employees, who increasingly want their banks to address societal challenges more actively. Banks therefore have an opportunity to carve out a competitive edge and key point of differentiation by actively addressing ESG topics.
- Guidance on how ESG risks should be assessed with respect to specific investment/financing opportunities: 72%
- Employee training on ESG matters: 67%
- Sustainability financing targets: 41%
- Diversity, equity, and inclusion commitments: 35%
- ESG sponsorship and oversight at board level: 31%
6. CONCLUSION
FOUR ACTIONS BANKS SHOULD TAKE
- Create rich customer profiles using internal and external data
- Integrate channels to provide a seamless omnichannel experience
- Digitize core banking systems
- Transform from a product-centric to a customer-centric operating model
7. ABOUT THE RESEARCH
The Global Banking Benchmark Study is based on a survey of more than 1,000 senior executives at banks around the world. The survey was conducted in the following countries:
- Canada
- United States
- United Kingdom
- France
- Germany
- Sweden
- Saudi Arabia
- United Arab Emirates
- Thailand
- Hong Kong
- Malaysia
- Singapore
- Indonesia
- Australia
RESPONDENT PROFILE
Role:
- C-level
- C-level -1
- C-level -2
- C-level -3
- Other
Annual revenue of bank:
- $25bn to $99.99bn: 30%
- $100bn to $499.99bn: 25%
- $1bn to $24.99bn: 25%
- $500bn to $999.99bn: 10%
- $1,000bn+: 10%
CONTRIBUTORS
- David Murphy, Senior Managing Director, Financial Services Lead, EMEA
- David Donovan, Executive Vice President, Financial Services Lead, North America
- Nigel Vaz, Chief Executive Officer
- John Romeo, Managing Director, Financial Services Lead, UK
- Sam Chenaur, Senior Vice President, Financial Services Lead, APAC
- David Poole, Senior Vice President, Financial Services Lead, UK
- Luca Martini, Senior Vice President, Financial Services Lead, EMEA
- Teresa Barreira, Chief Marketing Officer
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