'Digital banking challengers' will continue their rise in 2020: GlobalData

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'Digital banking challengers' will continue their rise in 2020: GlobalData

The expansion of digital banking will continue in 2020, according to a new survey, with ‘digital challengers' looking to extend their reach at the expense of traditional high street banks.

GlobalData asked leading industry figures for their views on the coming year, and digital banking was high on the agenda.

Omnio CEO, Adrian Cannon, told GlobalData: "As retail bank branches have continued to close, Amazon, Apple, Uber Money and others, have understood that by being hyper-relevant at multiple moments in their customer's everyday lives that they can reinforce their brand value and become an embedded and trusted partner.

Many challenger banks are now in a position where they are serious competitors to traditional banks, largely thanks to the huge investment in the fintech sector over the past year."

"These [digital challengers] are set to increasingly extend their product set into the financial services sector, challenging the big banks to raise their game quickly."

Ian Bradbury, CTO Financial Services, Fujitsu told GlobalData: "Many challenger banks are now in a position where they are serious competitors to traditional banks, largely thanks to the huge investment in the fintech sector over the past year. This will see them move even further into the mainstream in 2020.

"As a result, 2020 may be the year when a traditional bank takes the leap and acquires a challenger bank to take advantage of the brand loyalty, as well as the scalable cloud-native systems owned by those banks."

GlobalData banking editor Douglas Blakey, says: "The challengers versus incumbents debate is a fascinating one that will hot up in 2020.

"Digital-only challenger banks are on the rise. Six challengers are already worth more than $1bn (Brazil's Nubank $10.4bn, US' Chime $5.8bn, Germany's N26 $3.5bn and UK duo Monzo and Revolut at $2.5bn and $1.7bn respectively."

However, Blakey warned: "For the challengers, the aim is to do more than just raise capital, offer great looking apps and grow customer numbers. They need to expand their product ranges into more profitable sectors of the market. At the same time, they need to grow the number of customers signing up to use their premium subscription products.

"Switch rates for primary banking relationships remain stubbornly low.

"Despite the hype, UK challengers such as Monzo, Starling, Tandem, Revolut and N26 are not yet eating the incumbent banks' lunch when it comes to primary banking relationships. Nor are the majority of the challengers remotely close to break-even yet alone profitability."

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Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.