Emerging challenger banks around the world have reshaped customer expectations for modern banking. While upstarts are attracting millions of new customers, the largest incumbent banks are also ramping up their digital offerings to maintain dominance in the US market.
As Bill Gates famously said in 1994, “Banking is essential, banks are not.” While both may be important, over the years, the concept of banks has fundamentally changed.
For decades, bank branches have been the default channel for opening an account, depositing a check, or applying for a loan. But as mobile phones and internet access became ubiquitous, visiting a branch in-person has become less important. During the Covid-19 pandemic, global shutdowns and branch closures have further accelerated digital and mobile banking adoption.
Digital banking startups are forgoing physical presence for mobile-first interfaces that offer superior customer experience at a lower cost. In the past decade, venture-backed challenger banks have emerged across Europe, Asia, and, more recently, the US to capture this shift to mobile-first banking.
In recent years, these banks have garnered attention through viral customer growth. Meanwhile, the largest incumbent banks have continued to ramp up their own digital bank offerings while reducing reliance on physical branch networks.
The looming question is whether these venture-backed bank alternatives are merely catalysts for change within the walls of traditional players like Bank of America and JPMorgan Chase, or viable competitors with sustainable long-term business models. In other words, will the winners keep winning, or are the new entrants here to stay?
- What is digital banking, and why is it accelerating?
- Where the opportunity lies
- Post-crisis reform created opportunities for new entrants
- Macro, Covid-19, and regulatory impacts
- What the digital banking market looks like today
- User growth continues to pick up among leading upstarts
- Expanding product offerings beyond the debit card
- Diversifying revenue mix beyond swipe fees
- The outlook for digital banking
- Incumbents: Potential challenges for challenger banks
- Valuations: Far from earth
- Looking forward