Increased automation and regulation in the banking industry is having a negative impact on mid-sized bank – that’s according to a new joint white paper produced by Boston Consulting Group (BCG) and SWIFT.

The white paper has reviewed the new forces reshaping the international payments landscape, including the emergence of FinTech competition, globalisation of trade, digitalisation of interfaces, client expectations for more transparency, increasing regulatory activism, new technologies like open APIs, and cybersecurity.

The paper claims that banks will have to change their business models significantly. It outlines that global transaction banks, though well-positioned to address change because of their size and scale, still need to ensure successful integration of new technologies.

Additionally, smaller banks will need to continue to maximise their close relationships with preferred customers while outsourcing their subscale international payments operations to larger players, according to the research.

Finally, the white paper says that “the situation of mid-sized banks is the most problematic”. It notes that as banking becomes more automated and regulated, their costly branch networks and lack of scale is putting them at a serious disadvantage.

According to the white paper: “These banks may perhaps need to consolidate and transform their business models in order to maintain relevancy in tomorrow's international payment landscape.”

Stefan Dab, global head of BCG transaction banking practice, said: “If banks want to continue to be successful in international payments, they will have to transform their back offices, service offerings and technological capabilities. Mid-sized banks will face the most difficult strategic choices and change their business model depending on where their competitive advantages lie.”

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