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Uncertain Banks – Main Challenges Lie in Regulations and Changed Customer Expectations

Key Facts

  • Adaption of new regulatory parameters is a central topic for banks

  • Use of new technologies to satisfy changed customer expectations is becoming increasingly important for banks

  • Changed competition environment created through services offered by new players

  • Uncertainty among banks is high; need for action is increasingly clear

  • Concrete solution proposal mainly discussed by non-banking actors


The uncertainty among finance institutes is high. Despite the post-crisis environment of 2013, banks find themselves under increasing pressure to act. This pressure results, on the one hand, from the intensified regulations that aim to provide more security for savers and investors, but lead to heightened insecurity for banks. On the other hand, the pressure stems from the growth of innovators from non-banking and near-banking fields. Players who come with nothing other than their trust in the idea that small-scale approaches will function as well as heavy-hitters in non-banking sectors such as commerce and telecommunications are turning their attention to parts of the finance industry’s value-added chain and putting pressure on banks.

This year’s Handlesblatt conference on “Banks in Upheaval” focused on these challenges. One main topic of the conference was the pressure to adapt that banks must deal with as a result of new regulations associated with the introduction of Basel III and EMIR. The goal of the adaptions is not only increased capital reserves, but also the introduction of new reporting standards.

The required establishment and implementation of reporting systems that provide highly detailed information from hitherto insufficiently linked departments in real-time reports poses a challenge in terms of corporate politics as well. According to studies, over half of the European finance institutes are struggling with the introduction of complex IT-based real-time reporting systems. The necessary measures are tying up the banks’ human and financial resources. As a result, one of the topics of discussion was whether these measures, paid for by customers, will truly lead to long-term market stabilization and greater security against crises.

In light of the current decision by the FED in the US to continue its monetary and interest rate policies as well as the continuing low interest rates on international markets, this situation will not improve for the banking and insurance world over the next few years. Banking institutes are not the only ones for whom competition is restricted by the new regulations. For start-ups and smaller finance institutes, of which several introduced themselves at the Handelsblatt conference, the expanded requirements present increased barriers to entry into the banking and financial services sector. As a result, it’s possible that in the near future, smaller finance institutes will continue their development in a niche-focused way in order to avoid exploding reporting and capital reserve requirements. Much more will be demanded of businesses planning to enter the financial services market in order to overcome regulatory thresholds.

One of these niche-focussed financial service providers introduced himself personally at this year’s Handelsblatt conference. Raffael Johnen, the CEO of the peer-2-peer credit platform Auxmoney, was on hand to represent a company that is attacking the classic investment and interest business. Auxmoney provides an online platform via which private individuals can make their capital available to borrowers. After registering, users enter requests and offers for financing completely via the platform. Since its founding in 2008, the company has achieved over 62 million euros in cumulative financing volume.

Online-based platforms with simple and manageable interfaces are also in competition with classic banking services in other areas. Direct banks such as ING-DiBa, represented by chairman Roland Boekhout, have been gaining tangible market share among price-conscious, internet-savvy customers for some time. The number of hits on websites of traditional banking institutes, especially via mobile devices, is also consistently rising. However, a large number of bank websites are still not prepared for access by mobile devices. These institutes lack communication concepts specially designed for online and mobile channels. The result is a service that doesn’t really satisfy anyone, not even the loyal customers, and allows niche-focused providers to target specific parts of the service.

However, a traditional, universal, high-priced banking service is not necessarily in contradiction with a modern, technologically and internet-savvy customer base. As Uwe Fröhlich, preisdent of the BVR, emphasized, it’s important for banks to address customer segments in specific and efficient ways and to provide them with personal consultations at the bank branch during which comprehensive banking offers are presented. According to him, that is precisely where the difference lies between established institutes and direct banks or niche-focused financial service providers.

Future success for all market participants in this field lies equally in efficient linkages, cost-efficient reporting, and customer-oriented presentation of the services offered, whose IT-based development is a great challenge for many banks due to the current state of their business technology. One main factor involved in enabling banks to overcome their insecurity by themselves therefore lies in their ability to take on the challenges and to strategically align themselves with the potential that lies within the technology.


Handelsblattportal on “Banks in Upheaval” Conference

Study: Europe’s banks underestimate data management – Regulation creates IT problems for banks

Auxmoney – Market place statistics