News

Financial institutions look to tech investment to combat challenger banks

February 21, 2019

A great majority (86 percent) of bankers believe that challenger banks are a growing threat to their business; 44 percent believe they will be the single most disruptive threat in 2019, according to a survey commissioned by fintech provider Fraedom.

The study also found that, in response to the challenger bank threat, bankers expect their organizations to invest heavily in new technology (40 percent) and updating legacy systems (34 percent) in 2019.

"With challenger banks setting themselves apart by offering innovative technology platforms, commercial banks are now realizing they must invest in key areas in order to counter this threat," Fraedom CEO Kyle Ferguson said in the release. "This was also echoed by our survey, which found other disruptive influences in 2019 to be consumerization of technology (34 percent) and digitalization (22 percent)."

Almost half (46 percent) of respondents perceived legacy systems to be the biggest barriers to the growth of commercial banks, while 28 percent said the biggest obstacle was pressure to save money.

More than half (52 percent) of respondents said that AI and Machine Learning will be the technologies to have the biggest impact on commercial banking in 2019.

"It is clear to see that challenger banks are a disruptive force within the sector. Through the use of innovative technology, these banks have plugged a gap left by established retail banks and are acting as a stark warning to banks within the commercial space, which remains open to similar disruption," Ferguson said. "If commercial banks are to compete, they must become more agile and adopt new technology platforms suited to changing needs of businesses, or risk being left behind."