RESEARCH REPORT

In brief

In brief

  • After a decade of disruption, a digital end game is emerging in banking. Winners and losers will come from both traditional and challenger sectors.
  • Profit compression, the increased cost of risk, and accelerating digital transformation are all leveling the playing field for banks.
  • Another super-cycle is gaining momentum: Share and revenue are leaking out of banking into other industries, especially bigtech.
  • This is driven by ‘ambient banking,’ where banking services disappear into the background of our digital lives and industry barriers blur.


Since 2011, disruption has been the name of the game in banking, thanks largely to the rise of the broader digital economy. On Accenture’s Disruptability Index, which quantifies disruption across industries on a scale of 0 to 1, banking moved from 0.43 in 2011 to 0.52 in 2019 in terms of current disruption—elevating it from the index’s Vulnerable category and into Volatile. In 2020, Accenture Research estimated that 20% of all players in the banking and payments sectors were less than 15 years old.

The drivers of these changes—rising consumer expectations, nimble new industry players, powerful emerging technologies and shifting regulations—put immense pressure on incumbent banks to bring meaningful innovation to their established businesses.

And that was before the pandemic. COVID-19 supercharged the digital banking trend. Banks saw in-person traffic in branches plummet, along with the use of cash.

But the pandemic also had a less predictable impact: leveling the playing field. This is apparent in three key areas.

Three competitive keystones

1. Profit compression

COVID has weighed on the bottom line of many banks. Leading institutions saw double-digit net income declines in 2020—reordering banks’ priorities.

2. Increased cost of risk

The pandemic created a credit crisis, substantially increasing the cost of risk for banks.

3. Accelerating pace of digital transformations

The pandemic was a shot of adrenaline for digital change. Many banks reached milestones in months that they had plotted on multi-year journeys.

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The new world of ‘ambient banking’

While the digital end game emerges, another super-cycle that demands attention is gaining momentum. Market share and revenue are leaking out of the banking sector and into other industries, especially bigtech. Firms like Google, Apple, Amazon, Tencent and Rakuten are increasingly incorporating financial services products into their offerings.

These new offerings, like Google Plex accounts in the US and Alibaba offering product insurance to US and EU clients, present a choice for incumbent banks: They need to either embrace the change and partner aggressively, or find ways to increase the salience of their offerings to remain competitive.

To succeed in a post-COVID world, banks will need to either embrace the change and partner aggressively, or find ways to increase the salience of their offerings to remain competitive.

Four imperatives for success

The outlook is strong for banks that address these four imperatives, which are based on decades of our work with many of the most successful banks in the world.

Understand the unique dynamics of every market

To attract investors, banks need to understand what makes their markets distinct and focus on the specific capabilities that will help them thrive.

Reshape your business models

Forward-thinking banks will explore the art of the possible and transcend incremental improvements to their digital capabilities.

Set a strategy to reap the digital premium

Recent research shows that combining great technology with a strong purpose really differentiates superior performers.

Prioritize tech enablement

Competing on tech architecture will be key for generating value, as there is a strong correlation between tech adoption and revenue growth.

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Challenge everything

The future of banking is much less predictable than it was when the disruption kicked off a decade ago.

Success in this landscape demands a sharper focus on how each bank intends to win—along with the agility and ability to double down on what works and abandon what does not.

Banks that fail to change will struggle in this new battleground and the gap between winners and losers will become even wider.

It’s time to challenge everything—products, processes and philosophies—to become future-ready.

For more details on preparing for the digital end game in banking, read our full report.

Frequently asked questions

Accenture measures disruption across two dimensions: current disruption and susceptibility to future disruption. Our Disruptability Index analysis rated banking as being just above average (0.52 on a scale of 0 – 1) in terms of current disruption, although this is rising – it was 0.43 in 2011. It’s no surprise, then, that it’s expected to suffer more disruption in the years ahead. In fact, at about 0.67, it is second only to insurance out of the 18 industries analyzed.

Prior to COVID-19, the digital challenger banks were making significant advances in a number of important markets. However, rapid gains in customer numbers couldn’t hide the fact that most of these customers had a primary account with a traditional bank where they received their salary and kept most of their money. The gradual increase in trust in challenger banks was abruptly halted by the pandemic, which caused customers to retreat to the perceived safety of the more familiar brands. At the same time, traditional banks were forced to digitize rapidly, narrowing the gap between the service levels of the innovative newcomers and their more conservative rivals. The net result is that established banks are better equipped than ever to counter the threat of the digital start-ups.

The advent of ambient banking is a watershed moment for the banking industry. It describes the incorporation of financial services into the offerings of companies that are not, primarily, financial services providers. Until now, a customer who bought a car might have obtained a loan from a bank in a transaction that was linked to but distinct from the purchase of the car. With ambient banking, the financial aspects are a seamless, frictionless part of the primary transaction and the bank is usually invisible to the customer. The significance is that by conceding ownership of the customer relationship, banks also allow revenue and market share to shift out of the banking industry to large, strongly branded players – most of them bigtech platforms – in a variety of other industries.

AI is already widely used and new applications are continually being tested. In many banks it serves mainly to relieve workers of administrative tasks, improving both the accuracy and efficiency of routine processes and allowing the workers to spend more time on tasks that are complicated and require judgment and imagination. Increasingly, however, AI is being used also to improve the customer experience. By analyzing vast stores of data and converting insights into relevant actions, it enables banks to engage with, advise, assist and sell to customers in a much more personalized way. At a time when COVID-19 is isolating customers from their banks, AI is helping to bring them closer by facilitating more empathetic and meaningful engagements.

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