Summary
In the last decade, the concept of the digital-only bank has gone from isolated upstart players to 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 the advent of 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. Where a challenger has identified and solved genuine needs incumbents could or would not address, they have often succeeded in disrupting the banking market. 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.
Across the world, banking is changing. New digital-only providers are springing up to offer a range of old and new services. With the threat this poses to many incumbents, as well as the opportunity to potential partners and shrewd market players, we have chosen to review a selection of global players. This review looks at 11 of the most interesting digital challengers, including the likes of Monzo, Chime, and KakaoBank. It covers a wide range of categories including strategy, products, goals, funding, strengths, weaknesses, and overall prognosis. Also included is a summary of relevant national and regional markets. This 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.
Scope
Reasons to Buy
In the last decade, the concept of the digital-only bank has gone from isolated upstart players to 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 the advent of 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. Where a challenger has identified and solved genuine needs incumbents could or would not address, they have often succeeded in disrupting the banking market. 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.
Across the world, banking is changing. New digital-only providers are springing up to offer a range of old and new services. With the threat this poses to many incumbents, as well as the opportunity to potential partners and shrewd market players, we have chosen to review a selection of global players. This review looks at 11 of the most interesting digital challengers, including the likes of Monzo, Chime, and KakaoBank. It covers a wide range of categories including strategy, products, goals, funding, strengths, weaknesses, and overall prognosis. Also included is a summary of relevant national and regional markets. This 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.
Scope
- 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. Neither strategy is necessarily better than the other, with short-, medium-, and long-term consequences for both.
- It is rare to find a challenger bank that is outright profitable. After years of operations, the majority are not generating enough revenue to be sustainable right now, 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.
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.
Table of Contents
1. Executive Summary
2. The Global Digital Challenger Bank Market
3. Appendix
List of Figures
Companies Mentioned (Partial List)
A selection of companies mentioned in this report includes, but is not limited to:
- Bendigo and Adelaide Bank
- 86 400
- Xinja
- Up
- Atom Bank
- Metro Bank
- Monzo
- Starling
- Tandem
- Nubank
- Chime
- KakaoTalk
- KakaoBank
- Cuscal
- Ferocia
- Revolut
- N26
