The implications of post-financial crisis regulations are the biggest banking fear, according to the Temenos Community Survey, which also found that cloud computing continues to draw mixed reviews among bankers.

The survey was undertaken by global banking software provider Temenos, which gauged opinion from 190 banking executives across a range of banking sectors in 71 countries, including wealth management.

Of those surveyed 24 per cent cited the impact of regulation as the biggest challenge and primary concern facing banks today compared with 29 per cent for 2010 results. Some 23 per cent of respondents said customer retention is the largest headache.

Banks named their top three investment areas as being investment in new products and services, investment in IT and improving risk management.

Banks are making more money available for IT investment, said Temenos, with 64 per cent of those surveyed saying budgets expanded from the previous year (compared to 53 per cent in 2010), and 26 per cent citing that these were significantly higher. The biggest budget rises were seen in the retail and wholesale segments and tier 1 and 2 banks. The biggest areas of focus were reported as core banking renewal, risk management and business intelligence.

The firm also noted that other threats have continued to grow in importance among bankers this year. Twenty-three per cent of banks cited customer retention as their biggest challenge, up from 17 per cent in 2010, the survey statement attributing this to “banks coming to appreciate that customers are becoming less loyal, more discerning and have more alternatives than in the past."

In wealth management, retaining the "best" customers was felt most by private banks (30 per cent) and larger banks (31 per cent).

Another threat is competition: 18 per cent of respondents citing it as the biggest threat facing the industry, compared with 12 per cent in 2010. The biggest perceived competitive threats come from new entrants (mentioned by 30 per cent of respondents), existing large incumbents (19 per cent), overseas entrants (18 per cent) and peer to peer services (15 per cent), said Temenos.

“The fact that banks are unsettled by new regulations is not surprising given these are likely to weigh significantly on profitability and that their full effect and scope is still being determined. What is perhaps more interesting is the much greater collective concern about competition and customer retention compared with 12 months ago. This research suggests that, in an era of depressed margins, banks are worried about losing their best customers to competitors who can serve them better and their remaining customers to competitors who can service them more cheaply,” said Ben Robinson, director of strategic planning at Temenos.

The research also found that cloud computing drew mixed views among bankers, the majority of whom see the key advantage of running a cloud based model being increased organisational flexibility (38 per cent). Nevertheless most are still deterred by associated data security and confidentiality concerns (50 per cent of respondents) followed by a relatively large proportion citing lack of knowledge as a barrier to adoption (26 per cent).

However Temenos said there could be a softening stance towards cloud adoption, with only 29 per cent of bankers confirming they would completely rule out running applications in the cloud, compared to 41 per cent in 2009.

On mobile banking, the research found 33 per cent of bankers predicting the volume of mobile banking transactions to grow at an annual rate above 50 per cent and 13 per cent of bankers predicting a growth rate exceeding 100 per cent. According to Temenos, mobile banking is growing the fastest in Africa, where one in five banks expects the market size to double every year for the next three years, says the research.