The Trillion Dollar Digital Banking Profit Opportunity

$1 trilliondollar profit potential

Pre-financial crisis of 2008, banks enjoyed a typical return on equity (ROE) of 16%; today, the average is 8-9%.

Temenos research reveals that banks transforming their businesses with Temenos' digital banking software have achieved ROEs of 15.6% on average. Closing this ROE gap and bolstering global banking ROEs by 5-7%, can offer a profit uplift of up to $1 trillion across the industry (assuming an incremental $140 billion profit per 1% increase in ROE), for those banks on their way to digital transformation, as well as those that are yet to make meaningful advances.

The time is ripe for digital transformation

The urgency to transform has never been greater. New, innovative competitors are eroding margins and enhancing cost pressures on incumbent banks.

Thanks to disruptive business models from technology giants like Amazon, Uber, PayPal or Alibaba, the need for personalized experiences across all industries has soared. Banking is no exception. The onset of disruptive players, as well as challengers like Monzo or N26, means additional margin pressure, along with continued high regulatory and operational costs for incumbents. New entrants are using analytics-driven digitization to attract and retain increasingly less loyal clients with responsive and differentiated experiences based on innovative product and services.

The power of digitization

The world's most successful banks have embraced end-to-end digitization. Digitization not only transforms the customer experience but also results in a step change in banking financial performance - lower cost-income ratios and higher returns on equity.

Key findings from the inaugural Temenos Value Benchmark program show that top-performing banks using Temenos software invest in end-to-end digitization, underpinned by state-of-the-art analytics to achieve industry-leading profitability levels. They are able to focus their IT spend on growth and innovation (53%) rather than maintenance or non-discretionary regulation, and to launch differentiating new products faster resulting in higher customer growth. They engage digitally with more of their customers, cross-sell more and onboard customers faster. All of these contribute to higher customer satisfaction. Widespread and effective use of advanced analytics built on a strong data foundation across the enterprise is also a key characteristic.

In 2017, HSBC North America launched a new suite of credit cards online and the bank was able to increase the number of new customers 4-5 times over. This was due to streamlining application review lead times with 75% of applications processed without manual intervention; improved connectivity to an ecosystem of service providers; and enhanced front-end customer experiences. Overall, the bank focused its IT budget on growth and innovation instead of legacy system maintenance.

With this approach, HSBC was able to offer its customers an onboarding experience that was more convenient and a better fit for their increasingly digital lifestyles, while also making the back-office process faster and more efficient.

In 2019, ABN AMRO went live with a single, state-of-the-art digital platform for private and corporate banking. This end-to-end, highly scalable and configurable platform will allow ABN AMRO to benefit from efficiency gains by automating and simplifying processes and streamlining operations.

As banks recognize the size of the opportunity, digital transformations are being increasingly driven by top management, often CEOs who are personally driving change.

With the new cloud-native technology stack at Openbank, we are at the forefront of digital banking. We had the freedom to select the most technologically advanced core banking software available and be fully cloud-native. With Temenos software, we have leveraged new technologies such as artificial intelligence and machine learning to help retail and mass affluent customers save and invest automatically based on their life goals, or get a mortgage in 7 days from the web or their app to buy the house of their dreams.

Our full-service digital bank now serves over one million customers in Spain and we will be launching in three new markets before the end of 2019: Germany, The Netherlands and Portugal. Partnering with Temenos, we are changing the way people bank.

Ezequiel Szafir, CEO, Openbank, the digital bank of Santander Group

The legacy barrier to transformation

The vast majority of established banks still have complex and fragmented legacy-based systems pre-dating the digital era that by design are not geared up for today's digital world.

Banks running on legacy IT systems that are expensive to maintain and adapt, find it difficult to innovate and transform. It can take them months instead of days to design, test and deploy new capabilities, launching new products or adapting to new regulations, while their operating costs and risks continue to rise. Furthermore, legacy landscapes hamper banks' abilities to harness data and analytics to proactively understand customer needs, supply regulators with necessary information, and to make informed business decisions to improve business performance.

Temenos - translating the opportunity into reality

Temenos provides banking packaged software that has been proven to enable its top-performing clients to achieve industry-leading cost-income ratios of 25.2% and returns on equity of 25.0%, 2X better than the industry average. These clients also invest over 53% of their IT budget on growth and innovation versus maintenance, which is 2.5X the industry average, proving that IT investment is adding tangible value to banks' businesses.

As the world's leading provider of banking packaged software, focused exclusively on banking for 25 years and with 3,000 banks running their software, it is Temenos' vision and mission to help banking clients out of the vicious circle of low profitability and into achieving tangible business value directly driving banking performance.

We live in an era of huge opportunity for banks - a trillion-dollar profit opportunity for those that move away from legacy systems to modern packaged software running on the latest cloud-native, cloud-agnostic, API-first technology. Temenos helps institutions of all types — from large global banks such as Nordea and Standard Chartered to digital-only banks like Varo Money and Volt Bank — to unlock the business value of the digital banking opportunity and drive best-in-class performance and profitability.

Max Chuard, Chief Executive Officer, Temenos

Max Chuard and Ezequiel Szafir - Partnership for Digital banking transformation

Recognizing their role as a true strategic partner to their clients, Temenos introduced the Temenos Value Benchmark program in 2018 to provide their clients with data-driven insights on the tangible business value enabled by their IT investment. The program aims to measure and assess over 200 business and IT metrics and industry best practices that lead to tangible value creation across the entire banking value chain. As part of this exercise, participating banks receive a customized report comparing their business performance with Temenos' clients, with in-depth insights and actionable recommendations.

To discover more about the characteristics of top-performing banks download the Temenos Value Benchmark Insight Paper.


The tangible profit opportunity afforded by end-to-end digital transformation sends a clear signal to banks labouring over the decision-making process: act now to adopt modern, state-of-the-art banking software to enable digital transformation and innovation, or risk becoming irrelevant.

This page was paid for by Temenos. The editorial staff of CNBC had no role in the creation of this page.