The popularity of challenger banks have helped to drive the use of digital banking services, a new study from Juniper Research claims.
Estimates are for the number of digital banking users to exceed 3.6 billion by 2024, which will be up by 54% from the 2.4 billion expected users in 2020. Juniper believes this rise is being led by digital-only banks and digital transformation by established banks.
In its Digital Banking: Banking-as-a-Service, Open Banking & Digital Transformation 2020-2024 it found that digital-only banks have gained market share from traditional banks by offering better user experiences and tightly focused USPs.
The research recommends established banks to personalise their experiences through AI-powered personal finance management tools.
Juniper identified the Bank of America, BBVA and JPMorgan Chase as the three banks leading digital transformation.
It stated Bank of America’s chatbot Erica had a noticeable uptick in digital usage and engagement, while BBVA has capitalised on APIs. Finally, JPMorgan Chase has experimented with blockchain and is allegedly exploring a digital-only launch in the UK.
Research author Nick Maynard said, “These banks have executed highly effective digital transitions; however digital transformation is never complete. These banks must now refocus on the new strategies required to retain their digital leadership.”
Challenger banks are flourishing in the market. The UK’s Revolut recently reached a valuation of $5.5bn after it closed its Series D round. Fellow UK digital bank Monzo also showed its signs of growth, with plans to hire an additional 500 staff and the relaunch of a premium service.
Germany also have seen some challenger banks making headway in the market. N26 recently revealed it has reached over five million customers and has expanded its reach to the US, Greek and Slovenian markets.
It’s not just European challengers that are doing well. Brazil-based Nubank, which is valued at over $10bn, recently launched into Mexico to reach the unbanked population. The digital bank has also reached 20 million users, making it larger than the population of many counties.
Not everything is smooth sailing for digital banks. While British neobanks gained a combined six million new customers in the last six months of 2019, they are struggling to make profits. According to a report from Accenture, stated that UK challenger banks are struggling, with them losing between £5 and £15 per customer.
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