New Frontiers in Banking 2023: Contemplating the Future
Overview
This report presents findings from CCG Catalyst’s Banking Stability and Innovation Study 2023. Building on a key section of
our annual Banking Battleground Report, called New Frontiers, it analyzes institutions’ intentions across a number of key emerging areas and looks to provide insight into where the industry is headed when it comes to innovation and some of the specific spheres dominating the conversation.
Key Highlights
- CCG Catalyst surveyed 108 C-level bank executives between May and June of 2023 to gauge their attitudes and perspectives on the current environment with specific emphasis on technology, innovation, and new areas of opportunity.
- As part of our analysis, we’ve segmented key findings from this survey into three core sections: technical readiness and expectations, new business frontiers, and new technology frontiers.
- Overall, a majority of respondents to our survey feel generally technologically prepared. However, they are still less confident now than they were previously — specifically, although we’ve observed some bounce back from this question’s responses in our 2023 US Banking Study, which was fielded between September 2022 and February 2023 to the same target audience, the data represents a nearly 10-percentage-point drop-off from 2022.
- This shift is likely attributable to a number of dynamics, including regulatory and capital pressures afflicting the fintech market and a turbulent economic backdrop. While uncertainty is understandable in the current climate, though, institutions will need to be strategic about (and committed to) ongoing investment, being sure not to retreat in areas they decide are important to their future.
- As far as what those areas are, we provided executives with a range of innovation-related possibilities and asked them to select their top three based on potential impact to the industry, opportunity for the bank, and risk to the bank. We found respondents believe the top three areas of influence in the next 5-10 years for the whole industry will be artificial intelligence (AI), Banking-as-a-Service (BaaS), and digital currencies, while both AI and BaaS also made it into the top three on opportunity, along with faster payments. AI, digital currencies, and open banking regulation took the top slots when it comes to risk.
- Meanwhile, in addition to exploring perspectives at a high level, we took a look at how executives are approaching specific areas at their bank. These cover some of the innovation-related arenas discussed above as well as others, including a few that may be less technology-driven but nonetheless represent novel and often discussed opportunities. We asked respondents about each of these areas specifically and provide a dedicated subsection for each one.
- On new business frontiers, we focused on new frontiers that are changing the way financial services are constructed and delivered as well as how institutions operate. In this first edition of our report, we’ve included BaaS, embedded finance, bank-owned marketplaces, cannabis, and sustainability. Of important note, the frontiers we’ve chosen to cover represent only a subset of the opportunities out there. We’ve focused on these because of the central roles they’re taking in conversation presently.
- On new technology frontiers, we chose to take a deep dive into open banking, AI, cryptocurrency, and blockchain/distributed ledger technology (DLT) — all areas that would probably be seen by most as the cutting edge of cutting edge when it comes to technology in financial services.
- As always, an important note is that our findings broadly are meant to be directional, not instructive — meaning, not every institution needs to be leading the way on every front. While it’s important to understand what others are up to, how those insights are applied to each bank and its own strategy will be different.
The Bottom Line
The purpose of this report is to give bank executives a better grasp of where others are today and how they are defining and responding to the hottest pockets of innovation and technology in financial services. Overall, the outlook for progress is quite good from our standpoint. Indeed, despite some shaken confidence and pullback in certain places, interest in innovation and new frontiers appears to be surviving the current chaos. Of course, prioritization will be a key factor moving forward, but executives generally seem receptive to many of the areas and concepts covered here, and that’s a positive signal for the future. As far as we can tell, at a time when irrational behavior could very well be taking hold, the industry by and large seems to be reacting reasonably.
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