121. Many institutions are currently rethinking their business models, including their structure, operating models, processes and procedures, as a result of all the changes arising from technological development and changes in customer behaviour. These changes should ensure that business models remain viable and sustainable in the context of the new technological landscape.

122. There are a number of factors that could potentially threaten the sustainability of incumbents’ business models. As a result of the analysis performed, the EBA has identified five factors, that might significantly affect incumbent institutions’ business models from a sustainability perspective. These relate to (i) digitalisation strategies that incumbent institutions pursue to keep up with the pace of a fast-changing environment, (ii) challenges arising from legacy ICT systems, (iii) operational capacity to implement the necessary changes, (iv) concerns over retaining and attracting staff and (v) increasing risk of competition from peers and other

123. All five risk factors are presented and discussed separately in more detail. The digitalisation/innovation strategies, including their quality and incumbents’ ability to properly implement them in a timely manner, are considered to be the first and most important factor that determines the progress of incumbent institutions towards embracing the current challenges.

5.1.1 Digitalisation/innovation strategies