Benefiting from growing smartphone penetration, supportive regulations and so on, a growing number of digital banks have been launched, challenging the incumbents. However, among all digital banks, less than a quarter are known to be profitable. Key common characteristics among them are strong ecosystems, close engagement, unsecured lending focus, lean operations and transformed agile organisation.
This report comes in PPT.
Digital banking (mobile and internet) serve as key channels as part of the omnichannel offering from incumbent banks.
Targeting young and digital-savvy consumers, digital banks have a unique model that can operate fully digitally from acquisition, credit decisioning, service and engagement.
Key factors supporting development are growing smartphone penetration, improving digital identity infrastructure, supportive legislation, and fast-growing fintechs.
The spread of COVID-19 changed customer behaviour towards digital, supporting adoption of not only digital banks but also incumbents’ digital banking, as well as e-wallets and BNPL.
Key drivers include a large ecosystem, strong engagement, unsecured lending focus with sound risk management, lean operations, and organisational transformation.
Engagement and unsecured lending contribute to revenue growth, while ecosystem and lean operations largely drive cost reduction. Organisational transformation facilitates implementation of strategic initiatives.
Business opportunities have emerged not only for digital banks but also for incumbent banks, big techs and fintechs to directly drive the digital transformation of the banking industry.
Different markets have different regulations. Some have dedicated digital bank licences, while others allow big techs to acquire smaller banks to convert them into digital ones.
This is the aggregation of ATM, charge, credit, debit, e-purse and retail cards. Note that smart cards are not included in financial cards.
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