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Digital-Only Banks: Threat or Motivator?

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  • 25 Pages
  • December 2018
  • Region: Global
  • GlobalData
  • ID: 4750156
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Digital-Only Banks: Threat or Motivator?


The emergence of digital-only banks has jolted incumbents into varying degrees of panic. On paper, their business model seems enviable. Operating costs are low, unburdened by old legacy IT systems and costly branch networks. Consequently, superior operating efficiency enables competitive pricing. In addition, newer technology infrastructure allows for a more sophisticated and capable digital banking experience for customers. Faced with this new challenge, it is important for incumbent banks not to forget what their customers actually want.

While digital-only banks do possess significant competitive advantages, recent launches have demonstrated they also face difficult challenges that technology or price can’t solve. The benefits of digital banking to the customer and provider make the broad direction of strategy fairly simple: digitize.

The key question for banks is, to what extent? Do digital-only banks pose such a threat to valuable customer bases that wholehearted emulation is required? Or would digitizing selected parts of bank propositions be sufficient to mitigate the threat?

The report "Digital-Only Banks: Threat or Motivator?", aims to assess the risk posed by digital-only banks, identify vulnerable customer segments, and highlight actions that incumbents could make to improve their retention prospects.

Key Highlights
  • One in three consumers globally indicate a willingness to transfer their primary banking relationship to a digital-only provider.

  • Consumers in India, Singapore, and Scandinavia are the most receptive to using a digital-only bank as their main current/checking account.


This report assess the threat posed by digital-only banks and highlights changes incumbents could make to their digital banking platforms to mitigate the risk by -
  • Analyzing the unique environments shaping demand across a range of different markets.

  • Identifying customer segments most at risk within affluence and generational bandings.

  • Highlighting the PFM tools and mobile banking features that are most in-demand.

Reasons to buy
  • Build a more targeted retention strategy

  • Make more informed decisions about investments in PFM tools

  • Determine which mobile banking features to implement first.

Table of Contents

1.1. Market summary
1.2. Key findings
1.3. Critical success factors
2.1. Demand for digital-only
2.1.1. Incumbents in India and the Nordic markets are most at risk from digital-only challengers
2.1.2. Digitally savvy millennials, generation X, emerging, and mass affluent customers are most at risk
2.1.3. The customer segments most at risk are the most valuable
2.2. The perception of digital-only banks and the reality of the threat
2.2.1. At-risk customer segments believe digital-only banks offer better rates and digital banking functionality
2.2.2. At-risk customer segments cite innovation and poor digital banking functionality as reasons for switching provider
3.1. Reduce the functionality gap
3.1.1 Mobile banking features that remove pain points in customer journeys are most in-demand
3.1.2 Examples of new mobile banking features
3.1.3 Offer PFM tools that provide financial clarity and help customers achieve their goals
5.1. Definitions
5.2. Methodology
5.3. Bibliography
5.4. Further reading
List of Tables
Table 1: Summary of digital-only banks across markets
List of Figures
Figure 1: Percentage of consumers globally willing to use a digital-only bank as their primary banking relationship
Figure 2: Percentage of consumers willing to use a digital-only bank across different geographies
Figure 3: Percentage of consumers willing to use a digital-only bank across generational and affluence customer segments
Figure 4: Percentage of consumers who prefer to use digital channels for main banking activities
Figure 5: Profiles of customer most at risk from digital-only providers: generation
Figure 6: Profiles of customer most at risk from digital-only providers: affluence
Figure 7: Attitudes towards digital-only banks by vulnerable customer segments
Figure 8: Reasons given for switching by customer segments most at risk from digital-only providers
Figure 9: Level of demand for individual mobile banking features
Figure 10: Level of demand for individual personal financial management tools

Companies Mentioned

A selection of companies mentioned in this report includes:

  • Barclays

  • Commonwealth Bank of Australia

  • Nationwide

  • CIBC

  • Simplii Financial

  • Ally Bank

  • Finn

  • Marcus

  • Atom

  • Monzo

  • Lloyds Bank

  • Paytm Bank

  • Digibank

  • Xinja

  • Volt

  • Pelikin

  • 86 400

  • Frank

  • Tangerine

  • Bank Norwegian

  • Instabank

  • Starling