Big banks and the bigtech, fintech & digibank incursion. What is at stake?

Research

06 Sep 2019

Big banks are under siege from low rates, regulatory demands, fintech, newtech & maybe big tech. Here are our findings after a year of analysing the long term and asking what is at stake.

A banking industrial revolution

We think there's little doubt that global banking is undergoing something of an industrial revolution. As regulators work to lower barriers to entry in many parts of the world – issuing digital banking licences, opening up third party access to customer data through Open Banking and other similar initiatives – the cost of technology for start-ups is collapsing, customers are becoming increasingly comfortable with digital self-service, and bigtech and other firms are increasingly active in financial services.

Annual switching rates by product

Source: Company data, Ofgem, CMA

The market is telling you something is wrong in bank-land and/or the economy

Developed market banks are the second cheapest sector in the market after autos. And, whilst geopolitical and macro uncertainty are contributing factors, investors appear increasingly concerned that banks might not even be able to sustain current meagre ROEs in some geographies. Many lenders look to be struggling as they battle slow growth, low rates, higher regulatory demands, legacy technology and increasing competition from more nimble, lower cost competitors.

Factors which would persuade consumers to change bank

Source: UBS Evidence Lab

The issues, the choices, 18 case studies & primary data from 25,000 consumers

We expect a banking revolution in the next decade where the key question is the extent to which today's big banks can defend revenue share and profit margins. We examine (i) sector barriers to entry; (ii) the changes we expect; (iii) the role of society in change; and (iv) the strategies we think successful banks must deploy. Our findings are backed by 18 case studies and a host of UBS Evidence Lab data including a 25,000-consumer survey across 21 countries

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