S&P Global Ratings anticipated that traditional retail banks will need to digitize their business models in order to maintain and expand their franchises. It noted that digital solutions would allow banks to attract more clients, find new revenue channels, and become more efficient. It considered that the banks' new technologies would enable under-banked individuals and small- and medium-sized enterprises (SMEs) to have better access to banking services, especially in emerging markets. It said that traditional banks have already started to prepare for technological disruptions, as figures by KPMG show that 73% of the global fintech investments in the 2012-17 period were spent to upgrade banking services that are extended to retail and SME clients.  

In parallel, S&P expected mobile banking, cloud computing, artificial intelligence and blockchain to alter retail banking sectors in coming years. First, it noted that mobile banking would enable banks to retain existing clients, while facilitating greater financial inclusion. Second, it said that cloud computing provides banks with the flexibility to adjust their information technology infrastructure. Third, it considered that artificial intelligence would help banks improve their understanding of client behavior and, in turn, expand revenues. Fourth, it said that ledger technologies and blockchain would allow banks to make business transactions more efficient and secure. 

Further, the agency considered that client preference for emerging technologies will be the main catalyst for technological change, as banks would use such technologies to prevent customers from switching to more sophisticated service providers. But it pointed out that the banks' ability to respond to technological change will depend on their digital readiness. It also considered that market regulation and legal frameworks remain key in promoting competition and innovation. It said that authorities would need to protect banking systems from the negative effects of technological disruption that could reduce the quality of banking services and result in weaker and more vulnerable banking systems.
Source: S&P Global Ratings