External reports

The Future Of Digital Banking, Revisited

Sopra Banking Software's externally written reports with analyst firms

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Page 5 of 27

The drop in banks' confidence is not due to stalled progress on their transformation journeys. 2 The shift arises as banks — especially the ones with lower maturity — realize how hard transformation really is in disruptive times. Global shifts in geopolitics, wars, regulatory developments, and economic volatility weigh heavily on confidence. Banks are under sustained pressure to future-proof their business models by shoring up existing revenue streams and developing new ones, while still grappling with the aftermath of the COVID-19 pandemic. They face the following three main forces: • Macroeconomic developments present a challenging backdrop. Since last year, macroeconomic circumstances have deteriorated dramatically. The conflict in Ukraine has precipitated a macroeconomic shock, sanctions have worsened previously existing supply bottlenecks, inflation has surged beyond the levels that had been caused by the pandemic, and the outlook for growth has been steadily deteriorating. 3 One-third of respondents fear an economic recession, while supply chain disruptions have already impacted business. Banks are innovating to counter the downturn: 43% of respondents' banks are increasing their digital tool and service offerings to help customers manage their finances. Simultaneously, banks have to split their attention between increasing operational resilience (31%) and reconfiguring supply chains (30%), while having to cut back on budgets (26%) and headcounts (26%). • Collaborative business models challenge the idea of what it means to be a bank. The onset of open and embedded finance sees banks embedding themselves with partnerships across financial ecosystems to cater for complex customer needs. 4 Banks are caught between a rock and Pioneers proactively plan to weather the storm by increasing operational resilience, while Explorers are most anxious about an economic recession. Pioneers are paving the way with clear future visions. More than 9 in 10 recognize the vital role of collaborative business models. THE FUTURE OF DIGITAL BANKING, REVISITED 6

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