EY Banking Chief: The Banking Industry Must Build New Capabilities to Survive
EY's Jan Bellens explains how banks must develop agile governance models and embrace embedded finance to remain competitive while navigating geopolitical risks and payment system evolution through 2025.
By Justin Estes
On a recent episode of the Banking Transformed podcast, host Jim Marous spoke with EY’s global banking leader Jan Bellens about how financial institutions are navigating an increasingly uncertain future through 2025 — and beyond.
Q: What’s been the most significant change in retail banking globally?
Jan Bellens: I was in Asia when we saw the rise of the super apps and a lot of the digital drive that has come to consumer banking and retail banking in the world. And we’ve seen that shift globally.
Where we are now is one, but I think the shift to digital banking has not yet been completed. Not at all. And it’s still very, very patchy. Of course, some banks are fully digitally native and growing strong, with some great examples both in developed and developing markets.
The second wave that has started, and I already mentioned the super apps, is about embedded finance. And making financial services and banking services integrated into customer experiences and consumers’ daily lives.
Q: Where are you seeing the biggest innovations today?
Bellens: I think the trigger points are where the industry is changing and financial services are changing with it and are being integrated into it. I’m very excited personally about the mobility space where we’ve seen a complete change in mobility.
But what I find exciting is that in a lot of these cases, financial services, sometimes fintech, sometimes progressive banks have been part of that journey and are integrating themselves into those models. In the end, that’s what banks are for. They are there to support the economy and where those different industries are going.
Balancing Innovation with Market Pressures
Q: How are banks balancing the need to innovate with current profitability concerns?
Bellens: I think it’s not only the economic challenges, but sometimes it’s also challenging in terms of the regulatory agenda, which has hit the banks hard in terms of upgrading their technology stacks and upgrading their processes and models that certainly take cost away or investments away from the innovation space.
That’s a real challenge. But if you want to think and if you want to survive long-term as a bank, it’s important to carve out those spaces. And it might mean that you may not be able to do everything.
If you are in a situation where you have less investment capacity and less talent to commit, you may need to think harder about prioritizing the agenda.
The Rise of Embedded Finance
Q: How do you see embedded banking evolving, and what opportunities and threats does it present?
Bellens: If you look at the overall balance sheet for embedded finance, it is growing a lot faster than the direct or traditional retail banking balance sheet. And look, I don’t think that is necessarily a challenge. Well, it is a challenge for traditional banks, but there’s no reason they cannot play an active role in it.
But I think there’s certainly a role for the traditional banks to play there as well. And I think we see a lot of good efforts across the world from banks that are playing an active role in these ecosystems and in these models. And that is also being invited by some of these embedded finance players to do so.
Q: Do you see traditional banks successfully adapting to this trend?
Bellens: Yes, there are lots of challenges. There are challenges in terms of what the partnership model looks like. How do we think about customer experience? Particularly customer ownership and customer data, which are challenging.
But I think traditional banks shouldn’t rest on their laurels and sit back and give that market away. I think they should be at the forefront of it. And think about who to team up with and how to divide the pie that comes out of this.
Industry Consolidation and Competition
Q: Will we see significant banking consolidation ahead?
Bellens: I think the bar is always rising, and the investments- not just the investments but also the agile management and governance required to basically keep up in the space- will only rise. I think that’s really what will lead to more consolidation, particularly in the US and Europe.
I think a lot of this has not happened because there is an element… well, first of all, the banks got some help from the rising interest rates. So, it was a bit of a delay in execution, so to speak, because many retail banks benefited from that rise in interest rates in terms of their ROI.
Q: What’s driving this consolidation pressure?
Bellens: Not all banks will be able to keep up with the change required to serve retail customers going forward. And the system still has a lot of inertia that has held back more accelerating and more rapid consolidation.
Navigating Geopolitical Uncertainty
Q: How is the current geopolitical environment affecting banking?
Bellens: In the board discussions that I see and in the executive committees, geopolitical risk is very high on the agenda from a risk perspective. And it’s really very difficult to understand where the world is heading with a lot of geopolitical conflict and the geopolitical divide that has come forward.
We see a lot of banks preparing through scenario planning and hoping to build some more muscle on the operational risk side on how to deal with some of those geopolitical risks.
Q: What challenges do global institutions face in choosing growth markets?
Bellens: After the recent U.S. elections, of course, there’s quite a lot of concern about whether we will see more division in terms of the regulatory agendas in particular across Europe and the US for example.
So, if you look at Basel III reform and capital, if you look at the ESG agenda, if you look at even the data agenda, if we see too much of a divide across transatlantically, I think that’s going to be a challenge for the banking system as a whole to figure out where are we going to grow.
The Future of Payments
Q: How should banks prepare for changes in the payments ecosystem?
Bellens: Payments has been a very dynamic space for the last few years, and I think it hasn’t landed yet. We have already seen quite a lot of changes in payments on the front end and back end. But the payment rails itself have been relatively stable.
I think going forward, we will also see a lot of changes that are driven by a lot of the trends in the markets: instant payments, account-to-account payments, CBDCs, and digital currencies.
Q: What’s at stake for banks in the payments space?
Bellens: Payments are often certainly on the retail banking side, but even on the corporate bank side, they are often the real lifeblood of banks. And it’s one of the main reasons for customers to be with the bank; it’s what they look at on the customer experience front.
Banks have already lost some of that relationship on the payment side to fintechs or to other players. I think they should continue to pay attention and ensure they are certainly in the game on payments.
Building Agility for 2025
Q: What capabilities will be crucial for banks heading into 2025?
Bellens: The key is building agility in your governance and management model. When you look at responding to all of the uncertainty and the dynamic landscape coming, it’s almost impossible in a large institution to be prepared for everything and have a clean sheet strategy going forward.
It’s really about building the muscle to respond to changes. We see that across the board. We see that on the risk front and how to respond to operational risk challenges or other challenges. And it’s the same in the growth space: how do I quickly capture specific product or service opportunities?
Getting more agile and being able to respond faster, safely, and securely with good governance from the board to the frontline will be a key challenge. It’s easier said than done, but I do see some good examples of institutions worldwide that can do that.
For a longer version of this conversation, listen to "Banking 2025: Digital Revolution Meets Economic Reality", a podcast with Jim Marous, available here. This Q&A has been edited and condensed for clarity.
