Beyond the Hype – Insight into Digital Challenger Banks

Powered by

All the vital news, analysis, and commentary curated by our industry experts.

The concept of the digital-only bank has become a global phenomenon present in all major regions around the world. In the last two years alone, many digital challenger banks have witnessed rapid growth in customer numbers, and COVID-19 has accelerated this trend in some instances. However, while they are much more prevalent globally, digital challenger banks have broken out more easily in some areas than in others. Other markets such as the UK and Europe have proved easy for startup banks and third-party tech providers to enter but difficult to sustain. This has culminated in creating a mature market of hundreds of small players, producing increasingly specialist banks to solve particular needs that will struggle to achieve success over the longer term.

This insight into digital challenger banks report covers recent market history, regulatory changes, conduciveness for challengers to operate, as well as insights from our 2020 Banking and Payments Survey examining changing consumer attitudes to digital-only banks.

What are the market dynamics for digital challenger banks?

Digital challengers have broadly tried to grow in two ways. The first is via rapidly growing customer numbers to take advantage of economies of scale, while the other concentrates on creating a full suite of banking products as well as maximizing the deposit and lending potential of customers. After years of operations, the majority of digital challengers are not generating enough revenue to be sustainable, with some lacking the product suite to allow that to happen. Profitability will become an issue for even the most successful challengers within the next five years. The marketplace model has mostly been used as a tool with which to attract and retain customers. It is therefore unknown how valuable a banking marketplace is as the underlying value is hidden. Social media also helps players engage on an emotional level with customers as they become familiar with the brand, message, and usefulness of the proposition.

What is the regional outlook of digital challenger banks?

The key regions for digital banks are the UK, the EEA, Australia, and Asia.

The UK

The market has become increasingly concentrated over the last few decades, with several banks facing bankruptcy or being acquired by larger entities, particularly after the global financial crisis. This event also caused incumbent banks to refrain from lending to smaller businesses, as they were seen as too risky to bother with, creating a gap in the market for both challenger and non-bank lenders. Additionally, new rules on compliance and security have made simple banking tasks more difficult, both for banks and customers. Since the launch of open banking in August 2016, new challengers have steadily trickled into the market. Today, the UK has hundreds of banking players, with new, specialist firms launching almost every week.

The EEA

The EEA is a large collection of partially integrated banking markets, with a tradition of smaller regional banks, cooperatives, and credit unions in many European countries, including Germany, Norway, and Italy. However, running a conventional balance sheet bank in the EEA has proved increasingly difficult since the global financial crisis. Consequently, consumers have faced costs for basic banking services in the form of account charges or negative rates on deposits, as well as difficulties when trying to borrow money. Hence,

respondents in European countries were generally quite positive about the prospect of digital-only banks. Challengers that have been successful in the EEA market have typically first delivered consumers value in the payments market, offering a cheaper, easier way of changing currencies as well as sending remittances. 

Australia

Some of the newest operational challenger banks are in Australia. Banking there is heavily regulated in favor of the big four, namely CommBank, Westpac, ANZ, and National Australia Bank.  The Consumer Data Rights (open banking) regulations which are designed to force banks to share their data with trusted third parties, were held back in Australia for several years under the guise of data protection, only coming into force in January 2019.

Asia

The region is less enthusiastic about digital-only bank disruption from regulators compared to other regions. Consequently, in areas where digital banks have been set up, most are less than a year old. The general trend in Asia appears to be large business consortiums forming challenger banks rather than small startups. This could provide several advantages over Western challengers, such as having the capital to develop a full product set from scratch, not having to deal with short-term investor sentiment, and being able to shoulder losses for considerably longer. On the other hand, digital challengers in Asia are likely to have to work even harder than in the West to offer an innovative and appealing proposition.

Digital challenger banks, by key regions

Digital challenger banks, by key regions

For more regional insights, download a free report sample

Who are the key digital challenger banks?

Some of the key digital challenger banks are 86 400, Xinja, Up, Monzo, Starling, Tandem, Nubank, Chime, KakaoBank, Revolut, and N26.

Key digital challenger banks

Key digital challenger banks

To know more about key digital challenger banks, download a free report sample

Market report scope

Key regions The UK, EEA, Australia, and Asia
Key digital challenger

banks

86 400, Xinja, Up, Monzo, Starling, Tandem, Nubank, Chime, KakaoBank, Revolut, and N26

Reasons to buy

  • Gain insight into the strategies digital challenger banks are trying in each market, with their associated strengths and weaknesses.
  • Learn about threats to incumbents and newer digital challengers, as well as potential opportunities for acquisitions and partnerships.
  • Compare the performance and strategic direction of your firm against competitors.

Reasons to Buy

  • Gain insight into the strategies digital challenger banks are trying in each market, with their associated strengths and weaknesses.
  • Learn about threats to incumbents and newer digital challengers, as well as potential opportunities for acquisitions and partnerships.
  • Compare the performance and strategic direction of your firm against competitors.

Bendigo and Adelaide Bank
86 400
Xinja
Up
Atom Bank
Metro Bank
Monzo
Starling
Tandem
Nubank
Chime
KakaoTalk
KakaoBank
Cuscal
Ferocia
Revolut
N26

Table of Contents

Table of Contents

1. Executive Summary

1.1. Overview

1.2. Key findings

1.3. Critical success factors

1.4. Competitor overview

2. The Global Digital Challenger Bank Market

2.1. The UK market

2.2. Monzo

2.3. Tandem

2.4. Starling Bank

2.5. The EEA market

2.6. Revolut

2.7. N26

2.8. The Australian market

2.9. Up

2.10. 86 400

2.11. Xinja

2.12. The Americas market

2.13. Chime

2.14. Nubank

2.15. Asia

2.16. KakaoBank

3. Appendix

3.1. Abbreviations and acronyms

3.2. Methodology

3.3. Secondary sources

3.4. Further reading

Figures

List of Figures

Figure 1: UK attitudes towards digital-only banks remain positive but skeptical

Figure 2: Monzo uses every opportunity to showcase how it is both different and better for customers than its competition

Figure 3: European attitudes towards digital-only banks compare similarly to consumers globally, with attitudes steadily becoming more positive

Figure 4: Revolut offers a significant number of subscription benefits at competitive prices, but includes many of the best features as part of its free product

Figure 5: Although attitudes towards digital-only banks have improved, Australians remain skeptical of both challengers and incumbents

Figure 6: The Tree of Up engages users not just with the current offering but with the promise of more to come

Figure 7: North and South Americans display similar opinions regarding digital-only banks compared to consumers globally

Figure 8: Asian consumers think highly of digital-only banks, with most respondents considering them better than incumbents on multiple levels

Figure 9: Kakao used the best aspects of its brands when launching its bank

Frequently asked questions

Beyond the Hype – Insight into Digital Challenger Banks thematic reports
Currency USD
$5,250

Can be used by individual purchaser only

$15,750

Can be shared globally by unlimited users within the purchasing corporation e.g. all employees of a single company


Undecided about purchasing this report?

Enquire Before Buying Request a Free Sample

Get in touch to find out about multi-purchase discounts

reportstore@globaldata.com
Tel +44 20 7947 2745

Every customer’s requirement is unique. With over 220,000 construction projects tracked, we can create a tailored dataset for you based on the types of projects you are looking for. Please get in touch with your specific requirements and we can send you a quote.

Sample Report

Beyond the Hype – Insight into Digital Challenger Banks was curated by the best experts in the industry and we are confident about its unique quality. However, we want you to make the most beneficial decision for your business, so we offer free sample pages to help you:

  • Assess the relevance of the report
  • Evaluate the quality of the report
  • Justify the cost

Download your copy of the sample report and make an informed decision about whether the full report will provide you with the insights and information you need.

Below is a sample report to understand what you are buying

See what our customers are saying

“The GlobalData platform is our go-to tool for intelligence services. GlobalData provides an easy way to access comprehensive intelligence data around multiple sectors, which essentially makes it a one-for-all intelligence platform, for tendering and approaching customers.

GlobalData is very customer orientated, with a high degree of personalised services, which benefits everyday use. The highly detailed project intelligence and forecast reports can be utilised across multiple departments and workflow scopes, from operational to strategic level, and often support strategic decisions. GlobalData Analytics and visualisation solutions has contributed positively when preparing management presentations and strategic papers.”

Business Intelligence & Marketing Manager, SAL Heavy Lift

“COVID-19 has caused significant interference to our business and the COVID-19 intelligence from GlobalData has helped us reach better decisions around strategy. These two highlights have helped enormously to understand the projections into the future concerning our business units, we also utilise the project database to source new projects for Liebherr-Werk to use as an additional source to pitch for new business.”

Market Analyst & Management, Liebherr-Werk

Your daily news has saved me a lot of time and keeps me up-to-date with what is happening in the market, I like that you almost always have a link to the source origin. We also use your market data in our Strategic Business Process to support our business decisions. By having everything in one place on the Intelligence Center it has saved me a lot of time versus looking on different sources, the alert function also helps with this.

Head of Key Accounts, Saab AB

Having used several other market research companies, I find that GlobalData manages to provide that ‘difficult-to-get’ market data that others can’t, as well as very diverse and complete consumer surveys.

Marketing Intelligence Manager, Portugal Foods

Our experience with GlobalData has been very good, from the platform itself to the people. I find that the analysts and the account team have a high level of customer focus and responsiveness and therefore I can always rely on. The platform is more holistic than other providers. It is convenient and almost like a one stop shop. The pricing suite is highly competitive and value for our organisation.

I like reports that inform new segments such as the analysis on generation Z, millennials, the impact of COVID 19 to our banking customers and their new channel habits. Secondly the specialist insight on affluent sector significantly increases our understanding about this group of customers. The combination of those give us depth and breadth of the evolving market.

I’m in the business of answering and helping people make decisions so with the intelligence center I can do that, effectively and efficiently. I can share quickly key insights that answer and satisfy our country stakeholders by giving them many quality studies and primary research about competitive landscape beyond the outlook of our bank. It helps me be seen as an advisory partner and that makes a big difference. A big benefit of our subscription is that no one holds the whole data and because it allows so many people, so many different parts of our organisation have access, it enables all teams to have the same level of knowledge and decision support.

Head of Customer Insight and Research, Standard Chartered

“I know that I can always rely on Globaldata’s work when I’m searching for the right consumer and market insights. I use Globaldata insights to understand the changing market & consumer landscape and help create better taste & wellbeing solutions for our customers in food, beverage and healthcare industries.

Globaldata has the right data and the reports are of very high quality compared to your competitors. Globaldata not only has overall market sizes & consumer insights on food & beverages but also provides insights at the ingredient & flavour level. That is key for B2B companies like Givaudan. This way we understand our customers’ business and also gain insight to our unique industry”

Head of Consumer Sensory Insights, Givaudan

GlobalData provides a great range of information and reports on various sectors that is highly relevant, timely, easy to access and utilise.  The reports and data dashboards help engagement with clients; they provide valuable industry and market insights that can enrich client conversations and can help in the shaping of value propositions. Moreover, using GlobalData products has helped increase my knowledge of the finance sector, the players within it, and the general threats and opportunities.

I find the consumer surveys that are carried out to be extremely beneficial and not something I have seen anywhere else. They provided an insightful view of why and which consumers take (or don’t) particular financial products. This can help shape conversations with clients to ensure they make the right strategic decisions for their business.

One of the challenges I have found is that data in the payments space is often piecemeal. With GD all of the data I need is in one place, but it also comes with additional market reports that provide useful extra context and information. Having the ability to set-up alerts on relevant movements in the industry, be it competitors or customers, and have them emailed directly to me, ensures I get early sight of industry activity and don’t have to search for news.

Senior Account Manager, TSYS
Go even deeper with GlobalData Intelligence Center

Every Company Report we produce is powered by the GlobalData Intelligence Center.

Subscribing to our intelligence platform means you can monitor developments at Beyond the Hype – Insight into Digital Challenger Banks in real time.

  • Access a live Beyond the Hype – Insight into Digital Challenger Banks dashboard for 12 months, with up-to-the-minute insights.
  • Fuel your decision making with real-time deal coverage and media activity.
  • Turn insights on financials, deals, products and pipelines into powerful agents of commercial advantage.