Digital Banking Trend Analysis – The Quest for Profitability Driving Strategies and Product Development of Digital-Only Providers
All the vital news, analysis, and commentary curated by our industry experts.
Digital Banking Trend Analysis Market Overview
Digital banking has entered the mainstream across the globe. Digital banks have gradually become big enough to challenge conventional incumbents in markets including Brazil and South Korea. However, in other markets such as Hong Kong, digital banking is gradually commencing.
The digital banking trend analysis market research report provides an overview and analysis of the current state of play among digital-only banks across the world. To achieve this, the business models of 11 digital-only providers are analyzed and assessed based on their successes, failures, strengths, weaknesses, and future prospects. Alongside this, an analysis of the regional contexts these banks operate in is also included, with a time series of consumer attitudes towards digital banking provided for each region covered.
The report is split into five separate sections to cover the UK, the EEA, the Americas, Asia-Pacific, and Australia separately.
For more regional insights on digital banking, download a free sample
Digital Banking Critical Success Factors
- Many neobanks across the world have experienced rapid growth. On the other hand, banks that have followed a payment-based approach have struggled to balance monetization and customer acquisition.
- Many of the interchange fee- or subscription-based banks in this report have garnered a large user base. The prime example of this is the difference between Monzo and Starling in the UK. Despite having half the number of customers, Starling has twice the deposit holdings and has attained profitability (whereas Monzo has not).
- The banks that have had the most success have not necessarily been the banks with the largest portfolio of products. They have instead been the banks that have tailored their product offering and monetization strategy to market-specific pain points that need addressing.
For more critical success factors insights on digital banking, download a free report
Digital Banking – Key Competitors
The key competitors in digital banking are Monzo, Starling Bank, Revolut, N26, bunq, Chime, Current, Nubank, KakaoBank, Mox, ubank, and others.
Monzo: Monzo has taken several decisions that have helped in the massive upscaling of the company’s marketing. In addition, Monzo has massively ratcheted up its lending. On top of this, instead of letting its deposits sit idle as it had done previously, Monzo has massively increased its investments in treasury assets. Monzo’s subscription model has also witnessed popularity in recent years.
Starling Bank: In July 2022, Starling Bank announced its first full year of profitability. This is a major milestone not just for the company but for neobanks more generally. The success of Starling is evidence that there exists a path to profitability for neobanks. Integral to understanding what this path looks like is understanding Starling’s commitment to a balance sheet approach to digital banking. Furthermore, Starling can and does proudly boast about the consistent level of support it receives from customers. Starling has won best current account at the British Banking Awards for five years in a row. The company’s popularity with customers is not without justification.
Revolut: Revolut is also notable for putting a far greater emphasis on wealth management than other neobanks. Cryptocurrencies have increasingly become the focal point of this strategy, with Revolut now offering the ability to trade over 40 cryptocurrencies. The company has even gone as far as to establish a “learn to earn” program whereby users can educate themselves on cryptocurrencies and earn up to GBP10 ($12.10) in DOT cryptocurrency tokens.
For more competitor insights on digital banking, download a sample report
- Digital challengers are increasingly providing loans and becoming less reliant on transaction fees. Starling Bank in the UK and bunq in the Netherlands are two examples of digital challengers that have introduced loan products over the past two years.
- In doing so, they have joined other banks such as KakaoBank in South Korea and ubank in Australia in adopting a more traditional balance sheet approach based on net interest income.
- Whereas a balance sheet approach is associated with profitability, a strategy based on aggressive customer acquisition is not. The two banks that have managed to generate profit – Starling Bank and KakaoBank – have largely managed to do so because of their lending activities.
- Other actors that have expanded aggressively in terms of market share (such as Revolut) are still struggling to make a profit.
Reasons to Buy
- Gain insight into the strategies, product bundles, and messaging digital 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.
- Understand the relative viability of different digital banking models across different contexts.
- Gain an awareness of the general trends affecting the digital banking space.
- Compare the performance and strategic direction of your firm against competitors.
National Australia Bank
Table of Contents
- Executive Summary
1.2 Key findings
1.3 Critical success factors
1.4 Competitor overview
- The Global Digital Challenger Bank Market
- The UK
Monzo’s overhaul has renewed investor confidence
Monzo’s subscription model has seen recent success
Monzo has dethroned Starling as customer darling
Monzo’s fortunes are much improved, but it is not out of the frying pan just yet
3.2 Starling Bank
Mortgage and SME lending have facilitated profitability
Well-designed products are enhanced by complementary features
Questionable due diligence undermines an otherwise strong position
Slow and steady proves to be profitable
- The EEA
Expansion, expansion, expansion is the aim of the game for Revolut
Revolut has a messy product suite built around the central pillar of currency exchange
Profitability problems and alarm around auditors are causes for serious concern
Revolut is banking on the size of its customer base
N26 is following an unsuccessful subscription-based strategy
N26’s product portfolio lacks a guiding strategy
Poor management has led to avoidable scandals
Management has its head in the sand about N26’s biggest problems
A new investor prompted bunq to change course
bunq has a simple product line that sells itself on its eco-credentials
bunq’s new strategy puts the bank in a stronger position
bunq’s future depends on the success of its new direction
- The Americas
Chime continues to target the underbanked
Chime’s product portfolio is simple but well suited to the US market
Chime’s revenue strategy comes with long-term risks
The US success story facing a catch-22
The pandemic facilitated Current’s position as the second-largest US neobank
A savings account is the company’s primary value proposition
Current is in a better position to address long-term problems than Chime
Current needs to be more than a bank that was in the right place at the right time
Nubank is focusing on profitability and diversification rather than regional expansion
Nubank’s basic product portfolio is growing and diversifying
Profitability is a challenge that is only likely to get bigger
Nubank’s profitability push is likely to pay off
A balance sheet approach coupled with rapid customer acquisition has proven to be a potent mix for KakaoBank
KakaoBank has been purposefully cautious in releasing products
KakaoBank’s business model is fairly unassailable
KakaoBank’s successes will more than likely multiply
Mox’s strategy is carefully tailored to customer needs
Well-targeted products address Hong Kong customers’ pain points
Mox is lagging behind its biggest competitor ZA
There is a decent chance Mox will survive, but only if it keeps up with the competition
ubank’s strategy is basic and unambitious
ubank’s product line is fairly barebones as far as neobanks go
ubank strongly benefits from being a subsidiary of NAB
The lack of competition in Australia affords ubank the space to rest on its laurels
8.1 Abbreviations and acronyms
8.2 Currency conversions
GlobalData’s annual Financial Services Consumer Survey
8.4 Secondary sources
8.5 Further reading
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Frequently asked questions
What are the key regions covered in the digital banking report?
The key regions in the digital banking report are the UK, the EEA, the Americas, Asia, and Australia.
Which are the key competitors in digital banking?
Monzo, Starling Bank, Revolut, N26, bunq, Chime, Current, Nubank, KakaoBank, Mox, ubank, and others are the key competitors in digital banking sphere.
Which are the two examples of digital challengers?
Starling Bank in the UK and bunq in the Netherlands are two examples of digital challengers.
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