The next era of digital banking

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Peter Torrente is the U.S. sector leader for KPMG’s banking and capital markets practice. With more than 30 years of experience in banking and capital markets, Peter has worked with some of the largest financial services companies and has extensive experience leading large and complex bank audits.

KPMG’s Banking Industry Outlook Survey, conducted in March 2024, captures the views of 200 banking executives on how they are addressing economic, regulatory and technology changes. 

Among the key findings:

  • Two thirds of banking executives are confident in their banks’ growth prospects

  • Nearly 60% of respondents believe profitability will grow inorganically

  • Half of respondents are making significant strategic adjustments in response to geopolitical uncertainty

  • Almost two thirds (65%) say generative AI is an integral part of their institution’s long-term vision and strategy

The FR sat down with Torrente to get his insights on the survey’s conclusions. 

On the list of banking channels being prioritized by bankers in the survey, why is online banking ahead of mobile banking, open banking APIs and digital wallets? What does a focus on ‘online banking’ mean in this context?

Online banking was once the shiny new concept. But now that it is mature, banks recognize that they need to take steps to bring their offerings to the next level to meet rising customer expectations. Our survey highlights this reality as banks are investing heavily in next generation online and mobile banking capabilities that are hyper-focused on seamless interactions and personalized experiences. Simply having digital capabilities is no longer enough. Customers expect quality services while addressing trust concerns.

Thinking of enabling banking tools that are top-of-mind for bankers, biometric authentication topped the list at 44%, ahead of predictive analytics, generative AI and chatbots. Why is this a focus for banks?

In a digital world, the stakes for banks to get digital security right have never been greater as it is imperative to maintaining trust with customers. While not entirely foolproof, biometric authentication adds another critical layer of enhancement to online security. It is a top priority for banking leaders, along with improving efficiency and customer experience.

Half of executives surveyed said up to 5% of their team’s daily tasks could  be executed by generative AI by the end of the year. Why is this not higher?

Banking leaders are in the early stages of grasping the full potential of generative AI. At the same time, they recognize the extraordinary promise of generative AI in shaping future strategies to stay ahead of the competition. As banks grow more confident with generative AI deployment, we expect them to explore more value creation opportunities, with investments in front office market-facing generative AI applications such as chatbots, for customer service and sales.

Executives identified cybersecurity as a top risk, followed by interest rates and disruptive technologies such as generative AI. In your view, are banks doing enough? And why do you think geopolitical and political uncertainty wasn’t higher up on the risks identified by respondents (it ranked #5)?

In this era of compound volatility, banking leaders are navigating a myriad of short-term and long-term risks to growth. Banks recognize that accelerating their enterprise transformation efforts is critical to ensure sustained growth amid a sea of changes ranging from cybersecurity and generative AI, to regulatory and geopolitical uncertainty.

Just over half (52%) of respondents said profitability will grow through cost transformation. Does that mean cost cuts and layoffs?

Modern technology platforms are the foundation to accelerated growth. Every bank we interact with is trying to identify the greatest opportunities to create value for their organization using generative AI. This includes opportunities to increase efficiency and save costs, but we believe a narrow focus on productivity gains alone is shortsighted. We’re advising clients to assess how generative AI will disrupt their business and the competitive landscape, with new ways of working required to support new business models and new revenue streams.