## Stay Competitive in the Digital Age: The Future of Banks

_IMF Working Papers, February 19, 2021_

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## Bibliographic details
- Authors: Miss Estelle X Liu
- Published: February 19, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513570051.001

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### Overview
- Title: Stay Competitive in the Digital Age: The Future of Banks
- Author: Estelle X Liu
- Date: February 19, 2021
- Series: Working Paper No. 2021/046
- Issue: 046
- Volume: 2021
- Pages: 42
- DOI: https://doi.org/10.5089/9781513570051.001
- ISBN: 9781513570051
- ISSN: 1018-5941
- Publication type: IMF Working Papers

### Core analysis and findings
- The latest advancement in financial technology has posed unprecedented challenges for incumbent banks.
- The paper analyzes implications of these challenges on bank competitveness and explores factors that could support digital advancement in banks.
- The analysis shows that the traditionally leading role of banks in advancing financial technology has diminished in recent years.
- Ongoing efforts to catch up to the digital frontier could lead to a more concentrated banking industry, as smaller and less tech-savvy banks struggle to survive.
- Cross-country evidence suggests banks in high-income economies appear to have been the digital leaders, likely benefiting from:
  - a sound digital infrastructure,
  - a strong legal and business environment,
  - healthy competition.
- Nonetheless, some digital leaders may fall behind in the coming years in adopting newer technologies due to:
  - entrenched consumer behavior favoring older technologies,
  - less active fintech and bigtech companies,
  - weak bank balance sheets.

### Subject areas and keywords
- Subject: Digitalization, Emerging technologies, Financial markets, Financial sector development, Financial services, Technology
- Keywords: bank characteristic, bank competitiveness, bank concentration, bank condition, bank digitalization, bank firm, bank service digitalization, Banks, Digitalization, digitalization progress, Emerging technologies, Financial sector development, Global, WP

### Implications and policy-relevant points
- Digital leadership is correlated with institutional and infrastructural strengths (sound digital infrastructure; strong legal and business environments; competition).
- Policymakers and bank managers should consider that catching up to the digital frontier may intensify industry concentration, potentially disadvantaging smaller and less tech-capable banks.
- Risk factors that could slow adoption of newer technologies even among current leaders include consumer inertia, limited activity by fintech and bigtech firms, and weak bank balance sheets.
- The paper implies a need to support digital advancement across banks to prevent excessive concentration and to sustain competitiveness.

*Estelle X Liu. "Stay Competitive in the Digital Age: The Future of Banks", IMF Working Papers 2021, 046 (2021), February 19, 2021.*

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_Source: https://www.imf.org/en/publications/wp/issues/2021/02/19/stay-competitive-in-the-digital-age-the-future-of-banks-50071_