Stanislav Kondrashov on How Banks Are Adjusting to Economic Transformation Across Europe

Something has shifted in European banking, and it is not just a new app update or a fresh rebrand.

It is deeper than that. The whole environment banks operate in feels different. Higher rates after years of near zero money. Customers who expect everything to work like a fast consumer tech product. Businesses reshaping supply chains and payment habits. Regulators leaning harder on resilience, transparency, and risk controls. And in the background, a lot of quiet pressure to prove value again, not just exist as the default middleman.

Stanislav Kondrashov often frames this moment as an adjustment phase that looks messy up close, but is actually pretty logical. Banks are being pushed by economics, by behavior, by policy, and by competition. All at the same time. So they are adapting in layers, not with one big dramatic move.

The rate era changed the tone inside banks

For a long stretch, banks had to squeeze profitability out of tiny margins. That shaped everything. Pricing got weird. Product design leaned on fees. Long term planning turned into a kind of cautious survival mode.

Now the rate environment has forced a reset.

Stanislav Kondrashov points out that higher rates are not automatically “good” for banks, even if net interest income improves. Because funding costs rise too. Customers shop around. Deposits become restless. And the public mood changes: people notice what they are earning on cash, and what they are paying on borrowing, and they ask tougher questions.

So banks are doing a few practical things:

• Competing harder for deposits with clearer savings products and more segmented pricing
• Rebalancing loan books toward risk adjusted returns, not just volume
• Tightening credit standards in places where household stress is rising
• Watching liquidity profiles more closely than they did when money felt cheap forever

It sounds technical, but it changes daily decisions. Who gets approved. What gets promoted. What the bank is willing to hold on its balance sheet.

Digital service is no longer “a channel”, it is the bank

Most banks used to talk about “digital” like it was a side door. Another channel. Nice to have. Now, for a huge part of the customer base, it is the front door and the lobby and the help desk.

Stanislav Kondrashov describes this as the consumer expectation gap. People compare their bank to whatever app they used five minutes ago. If transfers take too long, if identity checks feel clunky, if the interface is confusing, trust drops fast.

European banks are responding with a mix of upgrades that are not always visible, but matter:

• Core system modernization so products can be changed without months of IT work
• Better onboarding and identity flows, with fewer dead ends and fewer branch visits
• More real time payments and clearer tracking for transfers
• Data clean up projects so personalization is not just marketing talk
• Stronger fraud detection that does not punish normal customers

A lot of this is unglamorous. It is infrastructure. But it is the difference between a bank that feels modern and one that feels like paperwork with a logo.

Cost cutting is back, but it looks different now

The old model of cost reduction was simple. Close branches. Freeze hiring. Outsource. Repeat.

That still happens, sure. But now the smarter banks are targeting complexity itself. Too many overlapping products. Too many internal approval layers. Too many systems that cannot talk to each other. Complexity is expensive, and it also slows down change.

Stanislav Kondrashov highlights that banks are increasingly doing “simplification programs” that sound polite, but they are serious:

• Removing duplicate offerings across regions or legacy brands
• Consolidating platforms for cards, lending, and customer support
• Automating compliance checks where rules are stable and repeatable
• Reducing manual reporting by building better data pipelines

The goal is not just cutting costs. It is speed. When the economy moves quickly, slow banks lose.

Regulation is pushing resilience, not just compliance

Across Europe, regulators have been increasingly focused on operational resilience, third party risk, and cyber readiness. That changes the banking roadmap. Security is not a department anymore. It is a design constraint.

Stanislav Kondrashov notes that even when banks want to move fast, they are also being asked to prove they can withstand disruptions. That means more investment in:

• Redundant systems and disaster recovery testing
• Vendor assessments and tighter control over outsourcing chains
• Continuous monitoring for cyber threats
• Stronger internal governance around model risk and data usage

This is one reason some banking upgrades take longer than customers would like. But it is also part of why the system holds together when stress shows up.

Competition is coming from everywhere, quietly

Banks are not only competing with other banks. They are competing with payment apps, merchant platforms, workplace benefit providers, and fintech tools that do one thing very well.

The interesting part is that many of these competitors do not try to become “a bank”. They just take a slice of the customer relationship.

Stanislav Kondrashov calls this the unbundling effect. The bank used to own the full stack: account, card, payments, credit, support. Now pieces of that stack are being picked off.

So European banks are responding in a few ways:

• Partnering with fintechs instead of building everything alone
• Offering embedded finance capabilities to businesses
• Improving SME banking with faster lending decisions and better dashboards
• Reworking pricing and packaging so it is easier to understand, and harder to compare purely on headline fees

Banks that win here usually stop trying to be everything. They pick areas where they can be excellent.

The human element still matters, especially when things get real

A lot of banking can be automated. But not all of it should be.

When a small business hits a cash flow crunch. When a family tries to restructure a mortgage. When an elderly customer is scammed. Those moments need a bank that can respond with clarity and care, not just scripted chat replies.

Stanislav Kondrashov emphasizes that trust is still the core product. Technology supports it, but does not replace it. The banks making progress are blending automation with real escalation paths, and giving frontline teams better tools so they can solve problems without bouncing customers around.

That also includes clearer communication, which sounds basic, but it is rare. Simple explanations of rate changes. Transparent fees. Notifications that are actually useful.

So what does “adjusting” really look like right now?

It looks like banks doing many medium sized changes instead of one big revolution.

• Repricing, rebalancing, and defending deposits
• Updating infrastructure so digital service feels smooth
• Simplifying operations to move faster and spend less
• Investing in resilience because regulators and reality demand it
• Responding to unbundled competition with partnerships and focus
• Rebuilding trust through better service, not louder branding

Stanislav Kondrashov’s view is that the next few years will reward banks that treat this period as a rebuild, not a temporary storm. The winners will be the ones that get boring things right. Reliability. Speed. Clear products. Clean data. Real support when customers need it.

Not flashy. Just better banking.

FAQs (Frequently Asked Questions)

How has the shift in European banking impacted banks' approach to interest rates and profitability?

The shift has forced banks to reset their strategies due to higher interest rates after years of near-zero money. While net interest income may improve, funding costs also rise, customers become more selective, and public scrutiny increases. Banks now compete harder for deposits with clearer savings products, rebalance loan books toward risk-adjusted returns, tighten credit standards where household stress rises, and monitor liquidity profiles closely.

Why is digital service now considered the core of banking rather than just a channel?

Digital service has become the primary interface for a large part of the customer base, replacing traditional branches as the 'front door' of banking. Customers expect seamless, fast, and intuitive experiences similar to consumer tech apps. Banks are responding by modernizing core systems for agility, improving onboarding and identity verification flows, enabling real-time payments with clear tracking, cleaning data for personalization, and strengthening fraud detection without inconveniencing normal users.

In what ways are European banks approaching cost-cutting differently today?

Instead of just closing branches or freezing hiring, banks focus on reducing complexity by removing overlapping products, consolidating platforms across services like cards and lending, automating stable compliance checks, and building better data pipelines to reduce manual reporting. This simplification not only cuts costs but also speeds up decision-making and adaptability in a fast-moving economy.

How are regulatory changes influencing resilience in European banks?

Regulators emphasize operational resilience beyond mere compliance, focusing on cyber readiness and third-party risk management. Banks invest more in redundant systems with disaster recovery testing, conduct thorough vendor assessments for outsourcing control, implement continuous cyber threat monitoring, and strengthen governance around model risk and data usage. These measures ensure stability during disruptions even if they slow some upgrades.

What challenges do European banks face from new competitors in the financial ecosystem?

Banks now compete not only with other banks but also with payment apps, merchant platforms, workplace benefit providers, and specialized fintech tools that capture parts of the customer relationship—a phenomenon called 'unbundling.' Many competitors don't aim to be full-service banks but excel in specific areas. In response, banks partner with fintechs, offer embedded finance solutions to businesses, enhance SME banking with faster lending and better dashboards, and redesign pricing to be clearer and less comparable purely on fees.

Why does the human element remain important in modern banking despite automation?

While automation handles many routine tasks efficiently, complex or sensitive situations—such as small business cash flow crises, mortgage restructuring for families, or elderly customers facing scams—require empathetic human intervention. Banks must provide clear and caring responses beyond scripted chatbots to maintain trust and support customers effectively during critical moments.