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The Way Forward for European Banks


The days of traditional banking are coming to an end. By studying a subset of resilient European banks, we’ve cracked the code on what it will take for incumbents to thrive far into the future.

No matter which direction they look, incumbent banks in the European Union (EU) are under extreme pressure. If it’s not the digital-first banks and fintechs creating new consumer choices on how, where and when they bank, it’s new open-banking regulations lowering the barriers to entry. If it’s not Brexit causing mass financial confusion, it’s blockchain roiling the waves of tech disruption. And lurking in the background is the threat of incursion by the digital giants Google and Amazon.

To better understand these threats, as well as how European banks should respond, Cognizant’s Center for the Future of Work, in partnership with Longitude Research, spoke to more than 300 senior leaders from European financial services organizations. These entities included incumbent European banks (organizations established 10 or more years ago); challenger banks (established within the last 10 years) and fintech firms (businesses providing financial services using digital technology).

The takeaway: European banks are increasingly vulnerable in the face of four major threats:


PSD2 could well diminish the control banks have over their customers. This is a serious threat to incumbents’ bottom line, and the protection many took for granted has started to erode.


Incumbents’ customer interactions are now being displaced by new entrants within their very own value chain, putting them at risk of becoming pure clearinghouses in their own industry.


Both fintechs and blockchain threaten to remove the need for the middleman in various places in the banking value chain. In our study, fintechs have been leading the charge in blockchain adoption, with both incumbents and challengers lagging behind.


Banking leaders are fast realizing the danger of the digital unicorns Google, Amazon and Facebook, listing technology providers as their greatest competitive threat within the next three years.

Becoming Resilient

From our research, we’ve identified a subset of incumbent bank respondents willing to embrace a new model of banking. We’ve dubbed this subset “resilient banks,” and drawing from their example, we created the “Resilient Bank Genome,” which encapsulates the elements needed for any bank to compete in the new digital landscape (see figure below).

Figure 1

Resilient banks put customer needs at the heart of their operating model by:

  • Breaking down silos between departments.

  • Nurturing a culture of innovation.

  • Actively implementing an open API architecture.

  • Aggressively adopting digital technologies.

  • Actively participating in the open marketplace.

In our study, resilient banks are much more likely than other banks to have implemented technologies such as advanced analytics, artificial intelligence/machine learning, robotic process automation and blockchain. And they’re also much further along in engaging in new partnerships (see figure below).

Figure 2

Earning a Place in the Future

Incumbent banks still have a strong hold on the market. But to earn and maintain their place in the new environment, they will need to prioritize the following in their approach:

  • Put customers at the heart of their operating model. Banks need to reframe data and processes around their customers. Resilient banks started by simplifying legacy systems and applying automation, and they are now prioritizing digital experience and data analytics investments. A better view of the client will enable a superior client experience and the ability to deliver more services at the right moment, thereby maintaining loyalty and wallet share.

  • Embrace the marketplace model. Open banking is still in its infancy, but it has the potential to scale innovation within incumbents. Traditional banks should explore the possibilities of either white-labeling fintech services, partnering or even creating fintech incubators/accelerators at the edge of the organization.

  • Utilize coming regulatory upheaval as a catalyst for change. PSD2 has the potential to expose incumbents’ technology, cultural and customer service shortcomings. But this regulatory change should be viewed as a driver for optimization, innovation and transformation initiatives and as the catalyst to overcoming internal barriers to change.

  • Incubate a culture that fertilizes innovation. For innovation and transformation to take off, there has to be a fertile environment for it to incubate. A culture of innovation needs to come from the top and pivot a central strategic aim. Communicate this often, and encourage employee feedback on strategic initiatives.

  • Don’t fall into blockchain oblivion. Don’t be fooled by slow movers in this area — the ramifications of blockchain at nearly every stage of the banking value chain will be profound. Identify these potential risks, pilot and then build in order to remain resilient. Also, the potential cost reduction of blockchain-enabled banking services should serve as the rocket fuel for championing these projects.

The days of traditional banking with astronomically high barriers to entry are coming to an end. By making a drastic mindset shift, incumbents can remain relevant and continue serving customers far into the future.

For more information, download the full report of “The New Banking Genome,” or watch our video at our Cognizant Center for the Future of Work website.

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