Traditional banks are modernizing systems and business models as new competitors and products disrupt the industry, ISG Provider Lens report says
Most banks in Germany are digitally transforming themselves as new competitors, regulations and consumer expectations trigger historic changes in the country’s banking industry, according to a new research report published by Information Services Group, a leading global technology research and advisory firm.
“This is changing the technological foundation of banking firms and their expectations of the service provider industry.”
The 2022 ISG Provider Lens Digital Banking Services report for Germany finds the three main types of banks in Germany — private, savings and cooperative — face growing competition, among each other and from fintech companies, neo-banks and global technology giants such as Google and Apple. These rivals offer consumers new banking options and user experiences, leading traditional banks to form their own neo-banks and innovative offerings.
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“German banks built around traditional services and physical proximity to customers are ramping up efforts to modernize their approaches,” said Owen Wheatley, lead partner, banking and financial services at ISG. “This is changing the technological foundation of banking firms and their expectations of the service provider industry.”
In the new banking landscape, institutions need to specialize for competitive advantage, so they are seeking partners to develop new digital business models, ISG says. Until the last few years, German banks shared an almost unchanging IT provider ecosystem that set the technology agenda. As waves of consolidation and competition overtake the industry, banks are beginning to engage with fintech startups, technology companies and a wider range of service providers.
Digital transformation at these banks has entered a second phase, the report says. After digitalizing processes to improve customer experience, banks are now undertaking deeper changes, affecting their business models and organizations. This phase will lay the foundation for constant innovation to keep up with new business requirements.
The evolution of banking regulations and increasing integration of banking across Europe are bringing other challenges to German banks, ISG says. Services supporting governance, risk and compliance initiatives, including integrated risk management and environmental, social and governance (ESG) platforms, are gradually evolving through the application of machine learning and AI models.
“Banks modernizing for the future of the industry will need to integrate old and new systems into highly complex, hybrid landscapes,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “IT providers with their own platforms and solutions, tightly integrated with the technology ecosystem, can help these clients navigate the transition.”
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The report also explores other trends in German banking, including the rise of new payment technologies and the emergence of open banking platforms based on microservices and APIs.
The 2022 ISG Provider Lens™ Digital Banking Services report for Germany evaluates the capabilities of 26 providers across four quadrants: Core Modernization and Integration Services, Technology Transformational Services for Digital Banking, Banking Governance, Risk and Compliance Services, and Payment and Card Processing Services.
The report names Accenture, Capgemini, GFT, IBM, Infosys and TCS as Leaders in all four quadrants. It names Deloitte, EPAM Systems and Sopra Steria as Leaders in three quadrants each. Atos is named as a Leader in two quadrants, and MSG and Wipro are named as Leaders in one quadrant each.
In addition, Atos, CGI, Cognizant, Senacor and Wipro are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.
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