Lloyds Banking Group's announcement of extensive job cuts and branch closures today provides more evidence that UK banks are realising the need to fundamentally rethink how they do business for the digital era. But as the incumbents realign their businesses, the concern (for them at least) is that they are just at the beginning of what could be major disruption in the sector.
Many industries have been transformed by the advent of online, and now mobile, technology. The retail sector is one case in point. But finance firms, for the most part, have evolved only slowly and have seen little disruption.
However, this could be set to change as a wave of new competitors come into the market - from start-ups, to challenger banks and even technology giants - all with the potential to erode revenues and steal market share.
Can the incumbents adapt?
The question for the banks then is whether they will see a new, digital-focused competitor take their place at the top of the food chain, or will they be able to adapt their businesses in time?
There are clear signs that the big banks are taking the threat seriously. As well as Lloyds, Barclays also announced major cuts to frontline staff last year, pointing to the need to cut its branch network and focus on automation and digital delivery.
Barclays has also arguably been the most advanced in its adoption and development of digital technologies, from its person to person payments platform Pingit, to cloud storage platform Cloud It, as well as beginning to overhaul its branches and arming staff with iPads.
Others too have sought to enhance digital services, with RBS announcing it will invest £1 billion in digital services in the coming years.
However, most of these lenders are encumbered by a variety of factors when addressing innovation, from their large size to the weight of regulations and even their hugely complex legacy systems which regulators are prompting them to untangle.
Competition comes in all shapes and sizes
One solution they have looked at is outsourcing innovation. This has meant partnering with the fintech start-up community, which has seen significant interest - particularly in the UK. A number of banks have announced incubator programmes, or have taken part in accelerator programmes.
But the rate of digital change is rapid, and non-traditional players with a different mindset to the big banks threaten to create more disruption. For example, banks are becoming increasingly aware of the willingness of technology vendors such as Google, Facebook, Amazon and Apple to move into providing financial services.
While it is unlikely, in the short term at least, that any of these will provide full account services, there is plenty to indicate that they could impact areas such as payments, and are better prepared to make use of customer data, than the banks have been up until now.
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