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In their battle to stay competitive, EU businesses—and banks in particular—have a new weapon: digital technology that can power transformative growth
For the first time in several years, prospects for growth in the EU are real. In fact, according to Accenture research, 65% of business leaders polled from its five largest economies - Germany, the UK, France, Italy and Spain - expect the economy to improve; a similar percentage expect to increase their workforces. An impressive 80% believe their businesses will grow this year. (See Accelerating Europe’s Comeback.)
Confronted by increasingly strong economies such as China and Japan, the EU’s big challenge will be to increase competitiveness. To achieve solid growth, Europe needs to ramp up its innovation abilities—particularly in the area of digital. As digital technologies such as mobile computing, social media, business analytics, big data, cloud and connected devices converge, they are transforming the way we work and live, in what arguably may be a larger, more significant shift than the one rendered by globalization during the past 20 years.
EU banks must seize this opportunity. Post-recession, they have begun their recovery, but growth is slow and profitability has remained low. Return on equity (ROE) for EU banks has lagged that of U.S. banks. Meanwhile, the competitive scenario for EU banks has changed, with non-financial entities stepping into the banking space to offer mobile and online payments and other digital innovations to financial services customers.
For banks, digital might be part of the problem—but digital also is the answer. Banks can tap digital technologies to drive cost reductions, manage risk and create innovative new products and services that open markets and drive new growth. Digital technology helps banks transform themselves into the indispensable “Everyday Bank,” helping to advise customers on when and how to purchase goods and services. Technology-led transformation from digital can deliver two-thirds of the profitability uplift that banks need to push into the high performer category.
Consider the option of one European bank that used cloud-based analytics to automate its risk assessment processes related to short-term lending. After only 10 days, the new system had handled more than 300 loan applications worth more than 250 million Euros. Elsewhere in Europe, another bank teamed with a local utility to create a mobile wallet, letting consumers use mobile devices to buy goods or services, redeem coupons and use loyalty cards.
These are tip-of-the-iceberg ways in which digital technology can help transform banking. EU banks that embrace digital have, within their grasp, a chance to become an Everyday Bank, to achieve dizzying profitability gains and cost and efficiency savings.
June 6, 2014
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