COVID-19 has had a significant impact on almost all (96 per cent) European banks, with over three quarters (78 per cent) planning to change their future banking strategy to adapt to changes in consumer behaviour, such as the accelerated adoption of digital banking services and cashless payments.

Marqeta commissioned Coleman Parkes to interview 200 heads of digital transformation, chief technology officers, heads of innovation and chief innovation officers at traditional and challenger banks in the UK, France, Germany, Italy and Spain.

It found that, as a result of growing demand for digital services, 80 per cent of banks have accelerated their plans to digitally transform. Banks also predicted that digital transformation projects will need to be delivered in two-thirds (69 per cent) of the time, with 89 per cent saying that the pandemic has drastically increased the speed of change in banking from years to months.

The study also found that three quarters of banks 'weren’t prepared' for the scale of change that COVID-19 has triggered in consumer behaviour, with a further 88 per cent admitting they were overwhelmed by the demand for online and mobile banking during lockdown.

Since the start of the crisis, banks said that digitally transforming to improve the online and mobile banking experience (76 per cent), offering new, differentiated payments services (70 per cent), investing in security and anti-fraud solutions (70 per cent) and modernising core banking and payment platforms (66 per cent) have all increased in priority.

Ian Johnson, European managing director at Marqeta, commented: “These are all trends that were set to slowly change over time and banks would gradually transform to adapt, but COVID-19 has drastically moved up the timescales, with 36 per cent of banks saying it has 'opened the floodgates' to modernising core banking and payment systems.

"Attitudes to modernisation have clearly changed - banks are now speeding up efforts to transform because they know that the winners of the next age of banking will be determined by who can best adjust their strategy to adapt to the new normal.”

Over three quarters (76 per cent) of banks say that the impact of COVID-19 has meant that the business models they used to follow have changed forever. As part of their future banking strategy, more than half (54 per cent) of banks plan to reduce their physical branch network.

Banks are also set to increase the number of digital services offered in branch (72 per cent), the provision of specialist payment services (68 per cent), their investment in digital banking and services (66 per cent) and their digital innovation capabilities (61 per cent).

As a result of the pandemic, 92 per cent of banks said that innovation has become more important than ever.

When it came to innovation, banks stated that they need to improve their use of data analytics to gain insights into customers that will allow them to make lending decisions in real-time (91 per cent), improve their technology capabilities to better use contextual data to make judgements on fraud as transactions are being processed (91 per cent), and implement technology and processes that enable them to control what loans are spent on (90 per cent).

“COVID-19 has ushered in a new age of digital banking," said Johnson. "Banks need to ensure they are prepared to adapt for this world, and many are set to double down on digital services and capabilities.

"But to do this, they need to overhaul legacy technologies that don’t provide the agility required to respond to the needs of the market," he added. "To adapt and thrive, traditional banks need to be supported with modern core banking and payment platforms that can support the requirement to digitally transform and provide the flexibility needed for their future banking strategies."

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