04/08/2011

By Scott Thompson

Customer retention and the implications of new regulations arising from the financial crisis continue to trouble banks, according to the latest Temenos Community Survey. The survey is conducted to understand global banking challenges, investment priorities and industry trends.

Gauging opinion from 190 executives across a range of banking sectors in 71 countries, the research confirmed the impact of regulation with 24 per cent of respondents citing this as their primary concern. This finding is consistent with 2010 results, when 29 per cent cited this as their biggest challenge and reflects concern over the impact that new regulation, like Basel III, is likely to have on their businesses.

Meanwhile, 23 per cent cited customer retention as their biggest challenge, up from 17 per cent in 2010, as banks come to appreciate that customers are becoming less loyal, more discerning and have more alternatives than in the past. The challenge of retaining their best customers is felt most by private banks (30 per cent) and larger banks (31 per cent).

The top three investment areas are investment in new products and services,
investment in IT and improving risk management. Looking at IT investment specifically, 64 per cent confirmed that budgets were up on the previous year (compared to 53 per cent in 2010), and 26 per cent cited that these were significantly higher. The biggest budget rises were seen in the retail and wholesale segments and tier 1 and 2 banks and, as in prior years, the biggest areas of focus are: core banking renewal, risk management and business intelligence.

The research also covered cloud computing and mobile banking. Cloud computing continues to draw mixed views among bankers, the majority of which see the key advantage of running a cloud-based model being increased organisational flexibility (38 per cent of respondents), yet most are still deterred by associated data security and confidentiality concerns (50 per cent of respondents) followed by a relatively large proportion citing lack of knowledge as a barrier to adoption (26 per cent). However, results suggest that despite these concerns, there could be a softening stance towards cloud adoption, with only 29 per cent of bankers confirming they would completely rule out running applications in the cloud, compared to 41 per cent in 2009.

In terms of mobile banking, 33 per cent of bankers predict that the volume of mobile banking transactions will grow at an annual rate above 50 per cent and 13 per cent predict a growth rate exceeding 100 per cent. Unsurprisingly, mobile banking is demonstrating the fastest growth in Africa, where one in five banks expects the market size to double every year for the next three years.