This scenario represents both a short-term challenge, insofar as new competitors may enter specific areas, such as retail payment services, with the consequent drop in business and income for banks in this area, and, fundamentally, a major future challenge deriving from the risk that banks may be relegated to providing undifferentiated and low value-added basic services. Against this competitive background, banks have a number of initial advantages but are being forced to react in order to capitalise on the opportunities the new situation offers. The responses may range from specialisation to digital transformation, taking advantage of the possibilities offered by technology and the new regulations, with an emphasis on adequate data management. In any event, this transition will entail a short-term increase in costs in a context of low profitability. Issues such as cybersecurity also take on particular significance in the process of adaptation of institutions to new technologies as they can also lead to an increase in operational and reputational risk. I would also like to highlight the growing challenge BigTech firms are posing in the financial sector, not in their more prominent customer-facing facet, but as providers of a significant amount of financial-sector infrastructure in areas such as cloud-based services. These actors now constitute a critical component of the financial sector. In any event, new technologies offer banks fresh opportunities, both in terms of business and potential efficiency gains.

The application of artificial intelligence and the use of large databases with real-time information (Big Data) may also provide for significant efficiency gains in terms of both business activity and regulatory compliance. 9/11  Similarly, the use of new technologies in the financial sector may offer advantages to society in that it reduces intermediation costs, improves households’ and SMEs’ access to finance and facilitates financial inclusion (see Chart 8). Financial disintermediation Another factor making the environment in which credit institutions operate more competitive is the advance of financial disintermediation. In Spain, as in countries such as Germany and Italy, the bulk of non-financial corporations’ borrowing has traditionally come from bank loans. However, in other countries, such as the United States and the United Kingdom, capital markets play a much bigger role in corporate finance. There is no consensus as to the optimal financing structure to best ensure financial stability and economic growth. On the one hand, it is true that the interaction between companies and banks involves the handling of non-public information about companies that may facilitate their access to bank lending at lower cost. On the other hand, having liquid and efficient financial markets makes it possible to channel households’ savings into long-term projects with a larger share of finance in the form of capital. Also, although the experience of the recent international crisis has taught us that an appropriate diversification of companies’ sources of financing reduces their vulnerability to shocks affecting bank lending channels, there is also evidence that capital markets are more procyclical.