Traditional retail banks are lagging behind digital-only challengers, with only two per cent seeing themselves as drivers of innovation, according to Roland Berger research.

The consultancy firm’s European Retail Banking Survey took in 60 senior staff members at banks of various sizes across 10 different countries. It found that when they were asked to state who was driving the establishment of banking platforms, banks came only fourth (44 per cent) after the tech giants (80 per cent), digital challenger banks (68 per cent) and FinTechs (65 per cent).

“Retail banks have not really managed to close the gap to the digital frontrunners yet,” said Wolfgang Hach, a partner at Roland Berger. “They are undeniably digitalising their existing business models and processes, but they haven’t done much about implementing real digital disruptions.

“In many cases, banks are currently leaving it to other players, especially the big technology providers and the FinTechs, to shape the future of retail banking,” he added.

This was backed up by experts at last month’s London FinTech Week who suggested the giants of the tech sector will make platform model plays into financial services within the next five years.

The report suggested that banks have sped up their processes up in recent years – accounts can be opened faster, consumer loans taken out quicker and even complex products like mortgages provided within much shorter timeframes – but partner Sebastian Steger commented: “many banks still think too much along the lines of traditional products and processes, which often leaves no room for genuine innovation”.

Roland Berger compared the situation to that of the airline industry, which often don't even sell their own flights anymore, with tickets frequently sold over platforms instead. Platforms already account for a significant share of the market for retail banking products, making up more than 30 per cent of new business, according to the research.

Retail banks must decide whether they will focus on being a relationship expert, product expert or technology provider. Although two thirds of the banks polled said they want to position themselves at the customer interface, Steger sounded a note of caution.

“Not every bank will ultimately be successful with their own digital offering or even their own platform, not least because platforms are only attractive when they bring large numbers of users and products or services together,” he explained. “That's why it's important for banks to identify exactly where their strengths lie and design their business model accordingly.”

So far this year there has been some evidence of UK High Street banks finally focusing on digital innovation. In March, Royal Bank of Scotland was rumoured to be in the early stages of creating a standalone digital bank, with former chief operating officer Mark Bailie reportedly leading the project.

In May, Santander moved a step closer to launching a standalone digital bank, by bringing its Spanish Openbank product to the UK. In the same month, HSBC UK launched Connected Money, the first app from a UK bank that allows customers to see not only their UK current account, but online savings accounts, mortgages, loans and cards held across up to 21 other banks.

Industry stakeholders have predicted that this autumn will see more banking innovation from both challengers and incumbents during the second six months of the Open Banking and PSD2 reforms.

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