The Future of Digital Banking
We all know what Digital Banking is, but not all of us know its future. Digital Banking is the delivery of banking services through electronic means, via the internet, mobile devices and ATMs. The first online banking service was said to be offered by Wells Fargo, back in 1996. In 2007, the USAA Federal Savings Bank offered their customers the world’s first mobile banking app. Now, every major bank has delved into the Digital Banking universe.
Digital Banking can be split into two different segments based on its deployment: on-premise and cloud (SaaS). On-premise deployment involves using your own proprietary technology to host the Digital Banking platform, which is much more highly favoured over a cloud platform, simply due to its heightened security levels. Grand View Research notes that the on-premise deployment segment is the most popular method, exhibiting a revenue share of 71.2% in 2021, with a forecasted CAGR of 20.4% over the next 12 years[i].
Service wise, the online banking segment is at the forefront of the market, offering retail banking services such as bank statement checking and inter-account transfers. Grand View Research reports that this segment dominated the platform market, accounting for 80.70% of revenue share[ii].
In this article, we explore the advantages of Digital Banking, both the global & British industry, as well as some potential investment opportunities within the Digital Banking landscape.
A Short Video Explaining Digital Banking
Global Digital Banking Market
Vantage Market Research deemed the revenue value of the Digital Banking Platform market to be around USD 7.75 billion back in 2022, with projections estimating it to reach ~ USD 17.5 billion by 2030 at a compounded annual growth rate of 10.70%[iii].
What can this continuous rise in demand be attributed to?
We must simply look at the vast, applicable array of advantages that the Digital Banking market can provide. The primary advantage banks can harness is the majorly improved customer experience; by providing enhanced services & faster resolutions when dealing with customer queries, banks have a proper foundation for client retention.
Other advantages of digital banking include, but are not limited to:
- Digital banking allows customers to access their accounts & conduct transactions from anywhere with an internet connection, saving them much time & hassle.
- Customers can tailor their platform so it fits their specific needs, helping them get the most out of their banking experience.
- Digital banking platforms will always stay up to date with the current security technologies to ensure customer data is protected; in turn, helping customers feel more secure about their finances.
Grand View Research found that the Asia-Pacific region dominated the global market, receiving roughly 30.5% worth of the market share in 2021; also, the region is projected to have the fastest growth rate, at a CAGR of 21.1% over the next 12 years[iv].
Global Digital Banking Firms
Perhaps the most notable Digital Banking Platform company worldwide is WeBank, a Chinese financial services company focused on providing services to SMEs and consumers solely in China. They offer a wide arrangement of products including savings accounts, loans, investment products and insurance. WeBank is mostly known for its technological innovation within the Digital Banking community, using AI to provide personalised financial advice to its clients. In 2022, the bank recognised a user base of 350 million individual customers & 3 million small businesses, achieved daily transaction volumes of over 790 million and generated revenues of USD 17 billion[v].
The second largest global company is right on the other side of the world; the United States’ Ally Bank, with over USWD 12 billion in 2022[vi]. Known for its low fees & competitive products, Ally Bank offers very similar solutions to around 12 million customers spread across all 50 states, including loans, checking & savings accounts, investment products and insurance. Some digital banking features they offer include financial calculators, online bill payments, mobile check deposits, customer support chat, automated savings tools and mobile money transfer. They are also involved with AI, like WeBank, to automate savings so their customers can save money without even realising.
UK Digital Banking Market
Globe Newswire reported a Digital Banking market value of just under GBP 5 billion, with expectations of a 13.9% CAGR until 2026, reaching a projected value of just over GBP 8 billion[vii]. The Digital Banking market enlargement can be attributed to the ever-evolving technologies we use daily and the increase in usage of digital services, alongside the many advantages online services grant over traditional banking methods.
UK Finance published some key findings after researching over 2,000 British adults, exploring how their attitudes & behaviour over Digital Banking had changed since March 2020, the start of the Coronavirus pandemic:
- 81% of adults say the quality of online experiences determines who they bank with.
- Usage of digital banking apps has dramatically increased across all age groups, with 60% of those aged 55 and over utilising online web banking more often.
- Usage of mobile banking apps has also dramatically increased across all age groups; 85% of 18-24 year olds, 79% of 25-34 year olds and a 52% increase between the 55+ years old age group.
- Over 50% of the sample said they have been using digital banking services even more since the pandemic began.
Some recognisable Digital Banking Platforms based in the UK include Revolut, with revenues of GBP 636 million[viii], Monzo, with revenues of GBP 440 million[ix] and Starling Bank, with an income of GBP 453 million in 2022[x].
UK Digital Banking Firms
Here at JCinus Partners, we have found five examples of some startup businesses currently on the market within the Digital Banking sector. Have a look below at the ones we identified:
This company, with its strong backing from Fintech Venture Capital and Angel investors, sets out to provide access to regulated investment products within the direct lending markets. Founded in 2015 by some in wealth management, banking and technology, the platform has already gained 30,000 investor accounts across 80 jurisdictions, offering services to professionals within asset management, fund admin, wealth management and private banking. This FCA regulated, series A business has an estimated revenue range between USD 1 and 10 million.
Company F strives to usher in a new generation of mobile digital payments through their app. While only a series A company, they are a leading provider of corporate payouts & payment solutions, licensed to operate in the EEA & UK. Some of their offerings include funds & loan disbursement, BIN sponsorship, cashless events and a multi-fund employee benefits solution mechanism. Through only one round of funding, the business has generated EUR 6 million from one investor.
Company N is a primary marketplace platform for the global debt capital markets, offering a space for both borrowers and dealers to carry out their trades. Some products the series A startup offers includes structured note issuances, a debt marketplace connecting over twenty dealers and ninety debt issuers from around the world, documentation technology which can generate term sheets, accession letters and regulatory filings and a post-trade platform that streamlines post-trade communication and collaboration. Since its inception in 2015, the marketplace group has gone on to gain over USD 9 million in funding, across four rounds.
Company Q is a growth capital offering service, with the aim to help digital brands unlock their full potential with founder-friendly capital and tools that accelerate growth. The Group offers eCommerce & Recurring revenue founders with up to GBP 10 million in startup capital for business scaling, marketing, inventory, R&D, or whatever capital is appropriately utilised for when it comes to building a company. Driven by AI, founders receive a funding offer when signing up to invest in inventory/market/sales, with the potential to gain more funding when needs be. Astonishingly, this series A company has amassed an enormous sum of GBP 301 million in funding in over just two rounds; clearly, founders have great access to capital when needed.
Company V globally presents a software company offering liquidity management, FX & international payments on CBDCs and tokenised money for banks & central banks. Some solutions the business offers includes interbank payments, intraday deliverable settlement liquidity, credit & loans, real-time visibility & control of tokenised liquidity & payments across banking groups and a CBDC Suite for Central Banks to deliver a direct issuance of domestic Central Bank Digital Currency. Founded in 2018 in England, the company has created numerous subsidiaries in Spain and South Africa. Through five investors spanning four rounds of funding, the startup has generated USD 25 million.
- [i] https://www.grandviewresearch.com/industry-analysis/digital-banking-platforms-market-report
- [ii] https://www.grandviewresearch.com/industry-analysis/digital-banking-platforms-market-report
- [iii] https://www.vantagemarketresearch.com/industry-report/digital-banking-platform-market-1667
- [iv] https://www.grandviewresearch.com/industry-analysis/digital-banking-platforms-market-report
- [v] https://www.theasianbanker.com/press-releases/best-global-digital-only-bank-and-in-asia-pacific-is-webank-2023
- [vi] https://media.ally.com/2023-01-20-Ally-Financial-reports-fourth-quarter-and-full-year-2022-financial-results
- [vii] https://www.globenewswire.com/en/news-release/2023/03/21/2631195/28124/en/Digital-Banking-Platform-Global-Market-Report-2022-Sector-to-Reach-10-33-Billion-by-2026-at-a-13-9-CAGR.html
- [viii] https://techcrunch.com/2023/03/01/revolut-reports-first-full-year-of-profit/#:~:text=In%202022%2C%20the%20company’s%20revenue,now%20has%2027%20million%20customers.
- [ix] https://www.businessofapps.com/data/monzo-statistics/
- [x] https://www.businessofapps.com/data/starling-bank-statistics/
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