Swiss banks are eager to meet the challenge from crypto-competitors with their own enhanced product offering. But the revolutionary technologies have yet to be taken onboard, a survey by the central bank shows.
On the day after the banking regulator issued the first two licenses to crypto-banks, the central bank published a report on digitization and fintech in Swiss banking. The conclusion by the Swiss National Bank (SNB): the industry hasn't progressed as much as it intends to and the potential for change has yet to manifest itself.
The big disruption has not (yet) taken place in other words. The SNB said that the entry by fintechs, big techs and digital banks has proven »relatively modest» so far.
Consolidation Remains Probable
The industry knows that it has to intensify its efforts in a bid to remain competitive. The banks expect to remain dominant players in the financial market but also believe that the new entrants will put a further squeeze on margins.
«In this regard, digitalization may be an additional factor that contributes to consolidation in the banking sector,» the SNB said in the report presented by Fritz Zurbruegg in Zurich on Tuesday.
The «Better» Bank
The industry is also aware of the potential change in customer demand and know that they have to enhance their product offering and invest equally in more efficient, cheaper processes.
The banks however expect no big disruption in the industry, a disruption that would marginalize the existing companies in favor of new entrants. The survey was conducted in the fourth quarter of 2018 and included 34 banks.
The companies however believe that banks will become «better» and more «fragmented». Digital banking and fintechs will motivate clients to compare services online and buy their banking solutions from several different providers.
Big Banks With Their Own Solutions
This change in behavior will force companies to modernize and digitize, in other word to become «better» banks. The SNB compared the digital strategies of the banks in Switzerland and found that bigger banks aspired to a significantly higher level of digitization than their smaller brethren. They are also more interested to provide their clientele with their own solutions, while smaller banks prefer to cooperate with others and to outsource some of their business.
Remarkably, the strategies didn't include to any major degree the potential of the Blockchain, cloud computing or artificial intelligence.
Mortgages and Payment Services
In the current stage of the development, banks are mainly focusing on providing digital services in the mortgage business and in connection with payments. The latter is also the area where they have made the biggest progress so far.
The next big step will include an extension of services on the customer interface, the SNB said. Clients will for instance apply for their mortgage online and receive an instant reply staking out the variety of service on offer at the bank.
