A new study by Temenos has found that for the first time since the study began five years ago banks are putting technology above regulation, which became a key concern after the financial crash.

The study by the banking software company says the legacy ‘spaghetti’ that forms the core to many banks’ IT systems is not fit for this new future.

However it found 73 per cent of bankers think retail banking will be at least 80 per cent automated in the next two years and almost a third believe banks will become platforms acting as a 'supermarket'.

This will see them offering access to other providers’ products, for example insurance, mobile payment services, loans and cash transfers.

 64 per cent of senior bankers think cash will represent less than five per cent of retail transactions in the next two years.

However almost half of the banking executives interviewed also believe that a cyber-attack will have caused at least one systemic bank failure in the next two years

The report, centred around the theme ‘Whose customer are you? The reality of digital banking’, is the fifth in a series conducted for Temenos by the Economist Intelligence Unit (EIU).

It highlights the need for co-operation as open banking becomes an increasing reality, in order to deliver the user experience customers want while keeping their money and data safe.

“Banking has reached a watershed moment with changing customer behaviours, disruptive new technologies and a dramatic increase in competitors from within and outside of banking,” said Temenos CEO David Arnott.

“The most enlightened banks understand that to become truly digital they need to update their systems front-to-back.

“This will fulfil their business need for product agility; they can offer the right products, over the right channel, and at the right time.”

Renee Friedman, the editor of the report from the Economist Intelligence Unit, added: “Although the banks may benefit from the FinTechs’ missteps, they must remember that the trust customers have in their bank will mean little if it cannot provide the services that accommodate their lifestyle needs.”

The Economist Intelligence Unit surveyed 400 global banking executives about the challenges retail banks expect to face between now and 2020, and the strategies they are deploying in response.

The impact of open banking and tighter security and data rules is not clear. While 71 per cent are focusing their digital investment on cyber security, only 17 per cent are thinking about the risks from third-party relationships as a result of open banking.

Banks can take FinTech on by building all-encompassing platforms that are seamless with other products and services.

AI is becoming a key part of the new technology mix, but just over 20 per cent of respondents think it will improve the user experience

Over 61 per cent of respondents still see a place for the traditional transaction-based branch model, nearly twice as many as those who think it will be dead by 2020.