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Money blog: Iconic Trio chocolate bar could return, hints McVitie's

The Money blog is your place for consumer and personal finance news and tips. Today's posts include NatWest launching the cheapest mortgage on the market, an old Liam Gallagher tweet about ticket pricing and our latest Bring It Back feature - as McVitie's tells us Trio could return.

Tuesday 3 September 2024 17:55, UK

• How your pension could be taxed more as chancellor refuses to rule out hikes
• High-street bank trumps rivals with cheapest five-year mortgage
• Iconic chocolate bar could return, hints McVitie's
• 'Blow' for female founders as agency backtracks on competition awards  

Essential reads

• Basically... Free school meals
• 'This job has saved lives': What's it like selling the Big Issue?
• Best of the Money blog

Tips and advice

• Cheapest holidays dates before Christmas
• Money Problem : 'My dog died but insurance still wants whole year's payment'
• How else to eat Greggs on cheap as O2 Priority scraps freebies

Ask a question or make a comment

An "urgent review" into dynamic pricing has been launched as the backlash from the price of Oasis concert tickets continues. 

The Competition and Markets Authority said it was looking into the ticketing market to make sure consumers were being treated fairly. 

Oasis fans were disappointed at the weekend when tickets for their reunion tour more than doubled while on sale due to dynamic pricing systems. 

Tickets shot up from £148 to £355 on Ticketmaster within hours of their release - and while fans were stuck in long online queues.

Dynamic pricing is common within industries beyond music - it's used frequently in the travel industry, with hotel rooms and airline tickets.

"The CMA is urgently reviewing recent developments in the ticketing market, including the way dynamic pricing is being used in the primary market," a CMA spokesperson said. 

They noted that consumer protection law requires businesses to be fair and transparent in their dealings with consumers. 

They are also required to give clear and accurate information about the price people have to pay. 

"The CMA wants fans to get a fair deal when they buy tickets," they added. 

"We have already acted against major resale websites on the secondary market to ensure consumer law is being followed. 

"But we think more protections are needed for consumers here, and made recommendations to the previous government in 2021 about the changes that are needed." 

The government has promised to look into dynamic ticket pricing, with Culture Secretary Lisa Nandy saying it would be reviewed in an upcoming consultation. 

Female founders have been dealt a "blow" after Innovate UK delivered just half the number of grants pledged in a funding competition for women business owners.

The Women in Innovation programme was aimed at encouraging women leading small to medium-sized businesses to apply for grants of up to £75,000 each.

The government-backed agency said it would be offering the grants to 50 female founders when it launched the competition earlier this year - but subsequently changed the wording to say "up to 50". 

Only 25 ended up being chosen to receive funding, out of 1,452 applicants.

Dearbump and Femtech founder Emma Jarvis said in a LinkedIn post that the situation will have left many female entrepreneurs "pretty disheartened"

The post  has been shared more than 100 times and has garnered nearly 830 reactions.

"Innovate UK's decision is a blow not just to existing female founders but future ones," Ms Jarvis said. "It's really disappointing to hear that the number of awards was cut in half and that the wording was changed after the results were announced."

She said the "only way forward" was for Innovate UK to honour its original commitment of 50 awards.

Meanwhile, Patricia McGirr, Repossession Rescue founder , said female founders "deserve more than lip service". 

She said Innovate UK's decision "isn't just trimming fat, it's cutting opportunity and ambition".

"This broken promise to the women fuelling our future is a step backward for innovation and a slap in the face to countless women who dare to lead."

And Debbie Porter, managing director at Destination Digital Marketing , said the move was "hard to believe".

"Innovate UK ought to go back over those 1,427 other applications as a matter of priority to fix this situation," she said. 

In a statement to the Money blog, Innovate UK apologised and said its decision was a "mistake". It also said it would honour its original commitment to award 50 applicants with funding.

The added: "We recognise the impact this has had on the many applicants and on the community as a whole, and we apologise wholeheartedly.

"We confirm we will be funding a total of 50 awards."

Our Money blog reporter Jess Sharp spoke to women who are  leading figures in their respective fields for our eight-part Women in Business series earlier this year. You can read some of their stories here...

Chancellor Rachel Reeves has refused to rule out heavier taxation on pensions in the October budget. 

"I'm not going to speculate on what will be in the budget, but I'm absolutely determined to ensure that working people are better off," she told MPs in the House of Commons. 

"This budget will be a budget to fix the foundations of the economy after the mess left by the previous government."

How could your pension be taxed further? Let's have a look at some of the possibilities...

Leading left-wing thinktank The Fabian Society said the government could raise at least £10bn a year by reducing pension tax relief for high earners. 

At the moment, pension tax relief depends on an individual's tax band. 

But Ms Reeves could create a single flat rate of tax relief for all tax bands, the society said.

"First, the rate of income tax relief should be equalised for people on all tax bands - for example at 30% of gross earnings, midway between the 20p and 40p rates of tax," the thinktank said in a report. 

Ms Reeves could also reduce the maximum tax-free lump sum  you can get on retirement from £268,275 to £100,000 or 25% of pension wealth. 

"The Institute for Fiscal Studies estimates that this might eventually save over £2bn per year, which would be targeted entirely at people with high lifetime earnings or assets," the report added. 

Another suggestion was to charge national insurance on private pension incomes . 

The organisation said it would lead to today's affluent pensioners making a higher tax contribution.

Other possibilities could be to levy income tax on all inherited pensions. 

It said pension pots could also be liable to inheritance tax in the same way as other assets. 

What else did the chancellor say today?

Away from refusing to rule out pension tax changes, Ms Reeves also confirmed a cap on corporation tax.

Speaking during Treasury questions, she said the tax would be capped at its current level of 25% to "give business the confidence to grow". 

Corporation tax applies to the annual profits of UK resident companies and branches of overseas companies.

The 25% main rate is payable by companies with taxable profits above £250,000.

A small profits rate applies for companies with profits of £50,000 or below, meaning they will pay 19%.

Up until April 2023, the previous corporation tax main rate was 19%.

After the revival of popular Cadbury's chocolate bar Top Deck earlier this year, we asked you which discontinued treat you would like to see brought back - and we got so many responses that we've decided to make a weekly feature of it called  Bring It Back . 

Every Tuesday, we'll pick one from our comments box and look at why it was so beloved and, crucially, find out whether the companies in question might consider reintroducing them.

This week we're looking at a chocolate bar that became a staple of lunch boxes in the 1980s and '90s - and spawned a TV advert that is among the most fondly remembered of the era: McVitie's Trio.

Sold in multipacks of six, each bar included three segments made up of a caramel layer over biscuit, all covered with milk chocolate.

The product became synonymous with a memorable commercial that featured an animation by artist Bob Godfrey and a play on the traditional Jamaican folk song "Day-O (The Banana Boat Song)".

Its lyrics, which will be familiar to almost anyone who grew up in the 1980s, included the bar's tagline: "I want a Trio and I want one now."

Having discontinued the product in 2003, it briefly returned to shop shelves in 2016 following a Facebook campaign, before vanishing from sale again shortly after.

Hordes of Sky News readers have called for the chocolate bar's revival.

Kellie said: "I'd love to have Trios back! They were yummy. McVitie's really need to start selling them again."

Derek told us: "What a chocolate bar the Trio was! I could eat an entire multipack in one sitting now if given the chance. And that old advert... instantly transported back to childhood just thinking about it."

Samantha said: "I can hear the jingle in my head now! Trios were just delicious chocolate bars... and we want one now!"

When asked by Sky News, a McVitie's spokesperson conspicuously declined to rule out a return for the iconic chocolate treat, saying the company was "constantly listening to what audiences want".

"This helps us to keep innovating and adapting to changing tastes, meaning more biscuits and snacks you love for generations to come," they said.

"For those who miss the caramel taste of Trio, one of our newest and most exciting innovations, McVitie's Gold Billions Wafer, will be your new favourite for on-the-go chocolate moments."

And, tantalisingly for fans of the bar, they added: "Watch this space for more to come..."

Along with the legions of Trio diehards, the Money blog will certainly be doing that - and hope to bring you news of further developments in the crusade in the near future.

Got a craving for any of the products below? Click the links to find out if they've got any chance at making a comeback... 

NatWest has launched the cheapest five-year fixed mortgage deal on the market. 

The 3.71% rate comes with a £1,495 product fee and is available to customers who have a 40% deposit. 

Other lenders have also announced cuts this week, including Barclays and Halifax. 

Yesterday, Barclays reduced its five-year fixed 60% LTV remortgage deal from 4.06% to 3.93%. 

It also announced cuts across its purchase product range, with a five-year fixed 75% LTV deal coming with a 3.95% rate and a £899 product fee. 

Halifax also launched a 3.81% five-year deal to new borrowers yesterday. 

Brokers have welcomed the cuts as "hugely positive" news, and suggested more lenders could follow suit. 

"NatWest's latest rate cut is another clear signal that mortgage lenders are pulling out all the stops to reignite the housing market," Ranald Mitchell, director of Charwin Mortgages, told Newspage.

"This flurry of rate reductions is a positive step towards finding that sweet spot where consumer confidence rebounds, and the property market gets back on track. 

"It's an exciting time for potential buyers, affordability is improving, and the window of opportunity is wide open." 

Justin Moy, the managing director at EHF Mortgages, said: "Lenders are looking to grab some market share by the end of the year.

"Other lenders will likely want to make a similar move over the coming days to remain competitive." 

By James Sillars , business reporter

It's a fairly muted start to the day's trading, again, on financial markets.

The FTSE 100 has opened 10 points higher at 8,373.

Rolls-Royce, the civil aerospace-to-defence firm (not to be confused with the luxury motor car manufacturer), is leading the gainers.

Its shares rallied by 4% early this morning after a 6.5% decline the previous day.

That tumbled was in reaction to the apparent mid-air failure of one of its engines on a Cathay Pacific flight .

Analysts said that the share price recovery was down to an update from  the airline that the fleet affected should be back to full operation by the weekend.

A tweet Liam Gallagher wrote seven years ago criticising the eye-watering price of gig tickets has come back to haunt him.

His message, written in September 2017 about his older brother Noel, who was touring America with his band High Flying Birds at the time, read: "350 dollars to go and see rkid in USA what a c*** when will it all stop as you were LG x"

The tweet has resurfaced after dynamic pricing for Oasis's much-hyped reunion next year left fans - many of whom had spent hours queueing online - stunned after some standard tickets more than doubled in price from £148 to £355 on Ticketmaster due to demand.

X users pointed out the irony upon seeing the 2017 tweet, posting comments including, "Well this is evergreen", "What's your excuse for charging over 368 quid then?" and "Not ageing well, Liam".

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Using a phrase Liam adopts in his own social media comments, another fan wrote simply "BIBLICAL".

Hundreds of people have complained to the Advertising Standards Authority (ASA) over "misleading claims about availability and pricing".

In response, Sir Keir Starmer has said the government will get a "grip" on the issue of surge pricing, with Culture Secretary Lisa Nandy promising a consultation over the transparency and use of dynamic pricing, and the technology around queuing systems, to ensure fans don't get ripped off.

Yesterday we revealed that official reseller Twickets had lowered its fees after criticism from Oasis fans.

Scroll through today's Money blog for: Cheapest dates to go on holiday this year (6.42 post); how do you get free school meals (7.58 post); pay-per-mile tax proposed (7.38 post)

Basically, free school meals are aimed at making sure the country's more vulnerable youngsters don't go hungry while they're learning in their earlier years.

Children of certain ages automatically qualify without having to apply, but the rules differ across the four nations.

Children whose parents claim certain benefits or asylum support may also be eligible - though an application may be needed.

Free school meals without having to apply

In England, outside of London , all state school children in reception to year two automatically qualify for infant free school meals, while in the capital , all state primary school children up to age 11 qualify for the benefit in the 2024-25 academic year.

In Scotland , all state school children up to primary five (around four to nine years old) get the meals automatically. There are plans for this to be extended to pupils in receipt of the Scottish child payment in primary six and seven from February.

In Wales  all primary school children in state schools can get free meals from September.

Families who claim benefits

If your child falls outside the eligibility criteria for automatic free school meals, they'll still be able to benefit in certain circumstances.

Wherever you are in the UK, your child may be able to get free school meals if you get one or more of the following:

• Income support
• Universal credit
• Income-based jobseeker's allowance
• Income-related employment and support allowance
• Support under part six of the Immigration and Asylum Act 1999
• The guaranteed element of pension credit
• Child tax credit
• Working tax credit (Scotland and Northern Ireland)
• Working tax credit run-on England and Wales) – paid for four weeks after you stop qualifying for working tax credit

There's some specific criteria for families by devolved nation, which we'll break down below...

England and Wales

If you're claiming universal credit, your net household income must be less than £7,400 after tax, and not including any benefits.

Those receiving child tax credit must not also be entitled to working tax credit and must have an annual income of less than £16,190.

If you're classed as having no recourse to public funds - a type of condition placed on temporary visas in the UK - and the parents are able to work, they must have a household income of no more than:

• £22,700 for families outside of London with one child
• £26,300 for families outside of London with two or more children
• £31,200 for families within London with one child
• £34,800 for families within London with two or more children

People claiming universal credit in Scotland must have a household monthly income of no more than £796 (£9,552 per year) to qualify for free school meals. 

Families on child tax credit, but not working tax credit, can get the meals if they earn less than £19,995. For those on both benefits, their income must be no more than £9,552.

Northern Ireland

You may be able to claim free school meals in Northern Ireland if you receive universal credit and your post-tax earnings are £15,000 or less per year.

If you get child tax credit or working tax credit, you can still get free school meals on an annual income of up to £16,190.

How can I claim the meals?

In England, Wales and Scotland, you apply to your local council.

The UK government website has a local authority postcode checker here , which directs you to the council running services in your area. There are similar tools on the Scottish and Welsh government websites.

In Northern Ireland, you can use this form to apply directly to the government.

How many children are eligible - and how much does it cost? 

According to the latest data from the Department for Education, 2.1 million pupils were eligible for free school meals in the 2023-24 academic year - 24.6% of pupils. This was a rise from 23.8% the year before.

According to the London mayor's office, it's estimated that school meals cost £13.25 per week - or £2.65 meal - on average.

It says its free school meals offer for all state-educated primary school children in the capital saves parents around £500 per year.

According to a 2023 report from the IFS, the current system of free school meals in England – both means-tested and universal provision – costs the government around £1.4bn a year.

But separate research from the Food Foundation found that expanding free school meal eligibility to all primary school students could generate around £41bn in direct benefits to students and a further £58bn to the wider economy over 20 years.

Read other entries in our Basically series.. .

Tax receipts from petrol and diesel duty bring in £25bn for the Treasury each year - and questions have been raised about what happens as more drivers go electric.

Today, the public transport charity Campaign for Better Transport (CBT) is proposing that drivers of zero-emission vehicles (ZEVs), such as electric cars, should be charged based on how far they travel.

They are asking Chancellor Rachel Reeves to impose the pay-per-mile scheme, saying it's the solution to a "black hole" that will be created by the loss of fuel duty.

The scheme would not apply to drivers of traditionally fuelled cars.

Under the plan, drivers with a ZEV before the implementation date would be exempt, incentivising the switch to electric vehicles.

Previous governments have found the prospect of introducing per-mile charges - known as road pricing - to be too politically toxic.

But CBT claims it would have public support.

Let us know your thoughts in the comments box - and read more on this story here ...

Summer may be edging towards the rear-view mirror, but that doesn't mean Britons are turning their back on sunshine. 

With many looking to sort an autumn holiday, Expedia has taken a look at the best times to fly and book hotels - with savings of up to £120 if you are savvy. 

Its data is based on average daily rates for lodging and flight prices between 22 September and 21 December this year.

When to book flights for

• Cheapest : 22, 23 or 24 September
• Least busy : 10 or 17 December
• Most expensive : 19, 20 or 21 December
• Busiest : 20 and 21 October

"For the best deals, travellers should look to book their flights 14 to 20 days before travel, saving them on average £120 compared to booking 91 days or more out, or saving £60 compared to booking 60-90 days out," Expedia says. 

"Target the 22-29 September for travel, when average ticket prices (ATPs) for flights are shaping up to be nearly £100 cheaper than the autumn average, and £50 cheaper than summer ATPs."

When to  book a hotel

• Cheapest : 20 November or 11 December
• Most expensive : 14 or 21 October
• Busiest : 23 October or 25 September

"For hotel stays, target the 3-9 November, when average daily rates are £15 cheaper per night than the seasonal average and summer stays," Expedia says. 

The holiday booking site says the most popular autumn destinations have remained largely the same as last year based on the largest number of hotel searches...

• New York, USA
• Paris, France
• Edinburgh, Scotland
• Amsterdam, Netherlands
• Manchester, UK
• Tenerife, Spain
• Birmingham, UK
• Rome, Italy

Despite this, Expedia says savvy Britons are searching out "under the radar" getaway spots.

"Flight searches have surged for Brits looking to discover new, under-the-radar European cities this autumn, such as Tirana (+95%) in Albania and Bucharest (+70%) in Romania, as Brits look to stretch their budgets further by looking outside the popular city break hotspots."

The top 10 destinations with the biggest search increases are:

• Saint Malo, France
• Didim, Turkey
• Syracuse, Italy
• Beijing, China 
• Palermo, Italy
• Tromso, Norway 
• Brescia, Italy 
• Poznan, Poland
• Tangier, Morocco
• Ischia, Italy

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• Next Generation Technologies
• Digital Banking Platform Market Size & Share Report, 2030

Digital Banking Platform Market Size, Share & Trends Analysis Report By Deployment (On-Premise, Cloud), By Mode, By Component (Platform, Service), By Service, By Region, And Segment Forecasts, 2022 - 2030

• Report ID: GVR-4-68039-969-6
• Number of Report Pages: 80
• Format: PDF, Horizon Databook
• Historical Range: 2017 - 2020
• Forecast Period: 2022 - 2028 
• Industry: Technology
• Report Summary
• Table of Contents
• Segmentation
• Methodology
• Request a FREE Sample Copy

Report Overview

The global digital banking platform market size was valued at USD 20.8 billion in 2021 and is expected to expand at a CAGR of 20.5% from 2022 to 2030. The demand for digital banking is growing because of the increased penetration of smartphones, computers, internet connectivity, IoT devices, and Artificial Intelligence (AI). Several advantages result from banks' paradigm change from traditional networks to digital and automated platforms, including increased productivity, cost reductions, and increased income prospects. In addition, the recent growth in cloud computing and storage has increased the significance of such technologies in the digital banking platform market.

The onset of COVID-19 pandemic has led to an increase in online banking activities, compelling both individual customers and businesses that had previously opposed internet banking, to move towards digital banking as their new standard practice. Besides this, the rising demand for consumer electronics products like laptops, cell phones, and PCs is mostly a result of technological advancements and consumer tastes in both developed and emerging nations. Customers frequently use devices to access numerous digital services in the contemporary environment. A significant number of consumers now utilize mobile apps or mobile browsers to access their bank accounts.

Banks can shift to digital ecosystems using easily deployable and customized solutions to digital banking platforms. Interactive mobile banking websites and applications help to boost client loyalty by enhancing customer service. Rising smartphone demand is expected to increase the number of digital banking consumers, which will, in turn, increase the need for digital banking platform solutions soon.

Banks are collaborating more often with fintech firms and outside apps. This is a win-win situation for both parties as it allows flexible money management for consumers and enhances the user experience without requiring the bank to completely redesign its system. Additionally, it offers stability and a chance for businesses to attract new clients, thus contributing to the growth of digital banking platform market.

Deployment Insights

In terms of deployment, the digital platform banking market has been segregated into on-premise, and cloud. The on-premise segment held the largest revenue share of 71.2% in 2021 and is anticipated to exhibit a CAGR of 20.4% in the forecast period. The on-premise model is favored by many users and it is safer than using cloud software. Additionally, security and IT staff have direct access to the software as it is installed and used exclusively within the user's network. There is complete control by the staff over its configuration, management, and security.

The cloud segment held the second-largest revenue share in 2021 and is expected to reveal the highest CAGR of 20.7% in the forecast period. Cloud and SaaS adoption will be critical to inclusive banking's future success. The inclusive banking environment is challenging, but much of that is offset by the benefits of Cloud and SaaS catering to communities with limited financial services. Financial insecurity caused by the COVID-19 crisis resulted in making Cloud and SaaS technology appealing to the developed world as well.

Mode Insights

The online banking segment dominated the digital banking platform market with a revenue share of 80.7% in 2021 and is anticipated to continue its dominance with a CAGR of 20.1% in the forecast period. The newest method of delivering retail banking services is online banking. Online banking refers to a variety of services, such as inter-account transfers, balanced reporting, and other common retail banking tasks.

These services are used by customers with which they can request information and perform using a telecommunication network to pay bills, etc., without leaving their homes or places of business. The mobile banking segment is expected to exhibit a CAGR of 22.1% in the forecast period. Key factors advancing the success of mobile banking include lower service fees and increasing smartphone penetration.

Component Insights

The platform segment dominated the digital banking platform market and held a revenue share of 59.6% in 2021. The services segment is expected to register the highest CAGR of 20% in the forecast period. Since the introduction of fintech, when tech corporate giants began enforcing reforms and developing new platforms for conducting business, banks have been pursuing digital transformation. To meet client needs and proactively launch new products, banks are now embracing digital technology and fully capitalize on these advances.

The advancement of financial services to the cloud is providing the opportunity to develop and reinforce a customer-centric strategy lowering obstacles to entry into the sector and expanding access to banking solutions. Additionally, it's opening possibilities for brand-new service packages that may take advantage of scale, data, and technology. Hence, there can be faster and easier access to data for ensuring regulatory reports, mitigation of risks, and identifying abnormalities in risk management.

Service Insights

The professional service segment dominated the market and held a revenue share of 63.0% in 2021. On the other hand, the managed service segment is expected to register the highest CAGR of 21.7% in the forecast period. Managed data center services may help optimize corporate operations in a hybrid IT architecture by increasing business automation and strengthening business management. As the frequency of cyberattacks increases, managed security services utilization in end-use industries is predicted to increase.

Managed security services are frequently utilized in business operations to protect sensitive data. The necessity for and adoption of managed security services is driven by the tremendous challenges that growing network complexity is creating to efficient data security management. The demand for managed security services has increased since it aids businesses in automating compliance monitoring in addition to helping them identify and reduce risks through security audits.

While client demands and competitive pressures lead banks to fully embrace digitization, performance demands force lenders to cut costs and maintain operating margins. Emerging technologies like AI and robotics are assisting banks in effectively addressing these limits as new regulatory requirements and data protection legislation add extra stress to already limited resources.

Type Insights

The retail banking segment held a revenue share of over 29.4% in 2021 and is anticipated to exhibit a CAGR of 20.8% in the forecast period. Banking is facing problems and opportunities because of the rise of digital banking, the development of new technologies, the blending of industrial ecosystems, and the increased emphasis on innovation. Customers are increasingly using digital platforms and fintech solutions, fragmenting the ties that were previously in place for basic financial services like deposits, loans, payments, and investments.For instance, according to Invest India, the Unified Payments Interface (UPI) in India has 323 banks participating as of May 2022 and has logged 5.9 billion monthly transactions totaling more than USD130 billion.

The investment banking segment dominated the market and held a revenue share of 35.8% in 2021 and is expected to reveal a CAGR of 20.4%. Following the reopening of international markets and the injection of economic stimulus by governments to minimize the negative impacts of COVID-19, the investment banking sector experienced a considerable increase in activity. Many investment banks have resumed operating from office locations and scheduling limited in-person client meetings. To restructure and remodel deal origination techniques, investment banks have started using hybrid conference strategies and the most recent technology.

Regional Insights

Asia Pacific dominated the regional market with a share of 30.5% in 2021 and is expected to register the highest CAGR of 21.1% in the forecast period. Asia's digital banking market is set for unprecedented expansion. New digital firms are radically changing the sector and revolutionizing banking for both individuals and businesses as demand for mobile and online alternatives increases. There is an exceptional potential for both existing players and new entrants to participate as regulators raise license allocations and define standards for a new age of banking.

For instance, India-based Wortgage Technologies Private Limited (WeRize), a digital banking platform startup launched in 2019, offers financial products to over 1,000 small cities and raised USD 8 million in a series known as “A funding round”. Besides this, North America was the second largest regional market with a revenue share of 27.2% in 2021 and is expected to reveal a CAGR of 19.9% during the forecast period. The adoption of cloud-based solutions is increasing across all business verticals, including the banking and finance sector. Banks are currently adopting cloud-based digital banking platform solutions, and this trend is expected to continue due to their low start-up costs and quick updates.

Key Companies & Market Share Insights

The digital banking platform market has a fragmented competitive landscape as it features various regional and global market players. Delivering a strong digital channel experience is an advantage for banks all around the world. Banks require a secure solution that delivers a uniform user experience across channels and devices and offers the insights required for wise decision-making. The players are incorporating strategies such as partnerships etc., to remain competitive in the market.

In June 2020, Summit Partners invested USD 37 million in Appway to help it in expanding globally. The money is expected to be used to assist and empower financial services in a new era of digital connectedness by accelerating international growth, product development, and technology innovation.

In July 2022, Revolut, a digital banking platform, declared that it would soon make its app available for easier use in Sri Lanka, Azerbaijan, Ecuador, Chile, and Oman. This would enable users to send money to more than 50 countries using more than 30 different currencies. Customers who transfer money to other Revolut users will not be charged a fee, but transferring to non-Revolut accounts will be subjected to a 1% cost.

In July 2019, Al Ahli Bank of Kuwait partnered with EdgeVerve Systems Limited to automate robotic processes. The business would be able to deploy Assist Edge robotic process automation.

Some prominent players in the global digital banking platform market include:

Alkami Technology Inc.

Fiserv, Inc.

Crealogix AG

Urban FT Group, Inc.

Q2 Software, Inc.

Sopra Banking Software

Tata Consultancy Service

Recent Developments

In December 2022, Finastra partnered with Veem, an online global payments platform. This partnership enabled banks and other institutions to innovate payments and offer digital AR and AP services for their customers.

In November 2022, Finastra partnered with Modefin, a digital banking platform. The partnership aimed to offer fintech solutions for banks in the African and Indian markets.

In April 2022, Fiserv, Inc. acquired Finxact to enable financial institutions to deliver differentiated digital banking services to their customers.

Digital Banking Platform Market Report Scope

Global Digital Banking Platform Market Segmentation

This report forecasts revenue growth at the global, regional, and country levels and provides an analysis of the latest industry trends and opportunities in each of the sub-segments from 2017 to 2030. For this study, Grand View Research has segmented the global digital banking platform market report based on deployment, mode, component, service, type, and region:

Deployment Outlook (Revenue, USD Million, 2017 - 2030)

Mode Outlook (Revenue, USD Million, 2017 - 2030)

Online Banking

Mobile Banking

Component Outlook (Revenue, USD Million, 2017 - 2030)

Service Outlook (Revenue, USD Million, 2017 - 2030)

Professional Service

Managed Service

Type Outlook (Revenue, USD Million, 2017 - 2030)

Retail Banking

Corporate Banking

Investment Banking 

Regional Outlook (Revenue, USD Million, 2017 - 2030)

North America

Asia Pacific

Latin America

Middle East & Africa

Frequently Asked Questions About This Report

b. The global digital banking platform market size was estimated at USD 20.8 billion in 2021 and is expected to reach USD 28.2 billion in 2022.

b. The global digital banking platform market is expected to grow at a compound annual growth rate of 20.5% from 2022 to 2030 to reach USD 107.1 billion by 2030.

b. The Asia Pacific dominated the digital banking platform market with a market share of 30.5% in 2021. The Asia Pacific is expected to maintain its dominance in the coming years due to the country being home to some of the world's largest makers of digital banking software such as EdgeVerve Finacle., Tata Consultancy Services (TCS) BaNCS., Wipro Core Banking As-a-Service., C-Edge Technologies Ltd, TrustBankCBS.

b. Some of the key player operating in the digital banking platform market includes Appway AG, Alkami Technology Inc., Finastra, Fiserv, Inc., Crealogix AG, Temenos, Urban FT Group, Inc., Q2 Software, Inc., Sopra Banking Software, Tata Consultancy Service and others.

b. The key factors driving the demand for the digital banking platform market include rising demand for smart mobile devices, shift from traditional to digital channels, and an increase in Machine Learning (ML) and Artificial Intelligence (AI) applications.

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Digital banking trends in 2024

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Digital banking encompasses various banking tools and trends, but one thing is certain: Digital banking is on the rise. Most Americans have used digital banking services in the past year, and more banks are offering new, innovative digital tools, from AI-powered budgeting to new ways to purchase everyday items.

“New technologies continue to evolve how we pay for things and manage our money, all with the promise of simplicity and convenience,” says Christine Roberts, EVP and President of Citizens Pay.

The rise of digital banking has coincided with a decline in the presence of traditional banks, which have faced a loss of more than 2,500 branches across the country in 2023, according to data from the Federal Deposit Insurance Corp. (FDIC). While traditional banks offer access to branches, digital banks — those offering only online and mobile banking services — often provide attractive yields and low (if any) bank fees .

Here’s everything you need to know about digital banking trends in 2024 and how they compare to traditional banking statistics.

Key takeaways

• Digital banking continues to grow, with most Americans having used digital banking services in the past year. This trend coincides with a decline in traditional banking, with over 2,500 branches having closed across the country in 2023.
• Innovations in digital banking, such as AI-powered budgeting tools and mobile payment platforms, are transforming the banking landscape.
• Some digital banks are also using AI to enhance customer experience and increase productivity.
• Despite the increasing popularity of digital banking, many customers still value the presence of physical branches.

Key statistics on digital banking

• A significant majority of consumers (71 percent) prefer to manage their bank accounts through a mobile app or a computer. ( American Bankers Association )
• The generation that’s most likely to prefer digital banking is millennials (74 percent), while Generation Z is the least likely (68 percent). (ABA)
• Consumers are generally satisfied with their banks’ digital offerings, with 97 percent rating their mobile and online banking experience as “excellent,” “very good” or “good.” (ABA)
• Additionally, 79 percent of customers say digital innovations in banking are making banking services more easily accessible. (ABA)
• Despite the fact that few prefer branch banking over digital banking, 38 percent of customers say branches are essential. ( J.D. Power )
• Of customers who don’t have an online bank account, 46 percent say it’s because they prefer access to a branch, and 30 percent cite security concerns. ( Bankrate )
• Around 4.5 percent of Americans are unbanked , meaning they have no bank accounts. ( FDIC )

Traditional banking vs. digital banking

Traditional banks are those that have a physical presence, and many of the largest U.S. banks, including JPMorgan Chase and Bank of America , are considered traditional banks. Online-only banks don’t have branches, and they may offer services both via desktop website and mobile apps.

The fintech firm Galileo found that 65 percent of consumers use traditional banks for their primary bank accounts, while JD Power reports that 27 percent primarily use online banks, as of 2022. However, of the 65 percent using traditional banks primarily, 77 percent said that they keep some of their funds elsewhere.

Here’s a look at the differences between traditional and online banks and the advantages of each.

Traditional banking trends

Traditional banks — those that have a physical presence — are still the predominant financial institution where people keep their primary bank accounts. However, their reach is declining.

Between 2017 and 2021, 9 percent of all branch locations closed, a loss of around 7,500 branches, according to the nonprofit National Community Reinvestment Coalition (NCRC). A third of those closures were in low- to moderate-income or historically marginalized neighborhoods.

In 2023, the FDIC reported an additional 2,555 bank branch closures, or about a 3 percent loss of total branches. The advantages of online banking (lower fees, ease of access) have recently affected the way that many traditional banks do business. One significant change in traditional banking over the past few years has been the elimination or reduction of overdraft fees . Citibank, PNC Bank and U.S. Bank are three of several of the banks that have eliminated or decreased their overdraft fees.

Most large, traditional banks also now offer comprehensive mobile apps , where consumers can complete basic banking transactions such as transferring funds between accounts, checking account balances and making mobile check deposits . Some of these apps even come with advanced tools like automatic savings features.

Several traditional banks also offer account opening bonuses to incentivize consumers to open an account with them.

One feature common to traditional banks is the offering of in-person services with a bank teller. Data shows that older generations are more likely to prefer speaking to a bank teller as their primary method of account access than younger people. Here’s how it differs by age, according to a 2023 survey by the ABA.

Key statistics

• At the time of this writing, there were  79,833 FDIC-insured bank branches across the U.S. (FDIC)
• The bank with the most branches is Chase Bank, which has around 4,900 branches in the U.S. and abroad, as of the time of this writing. (FDIC)
• Between 2019 and 2021, consumers’ use of a bank teller to access accounts declined from 21 percent to 14.9 percent. (FDIC)
• About a third (31 percent) of banked households primarily used physical channels, such as a bank teller or ATM, to access their accounts in 2021. (FDIC)
• While 38 percent of consumers consider bank branches to be essential, 72 percent say they plan to use their bank’s branches at the same rate in 2024. (J.D. Power)
• About two-thirds (66 percent) of consumers like to see bank branches in their neighborhoods. ( Accenture )
• About one-third of the branch closures that occurred between 2017 and 2021 were in low- to moderate-income neighborhoods or neighborhoods made up of predominantly racial minority residents. (NCRC)

Digital banking trends

Digital banking encompasses a wide range of mobile and online platforms that provide banking services. While digital banking services don’t have branches, they may be part of large ATM networks or allow for in-store cash deposits/withdrawals.

Digital banking is becoming more popular with consumers. Use of mobile banking as the primary method of account access, for example, increased from 15.1 percent of consumers in 2017 to 48 percent in 2023.

Innovations in digital banking are also changing the way we pay for things. “Digital wallets, mobile payment platforms, and contactless payment options continue to rise in popularity, transforming the payment landscape and bringing consumers more choices,” Roberts of Citizens Pay says.

She notes how biometric technology is growing in digital payments. “Imagine tapping your finger to pay at the grocery store or receiving authorization on a loan with a quick eye scan – companies like Mastercard are even testing  paying with a smile ,” she says.

Another digital banking trend is the use of AI to aid in everyday banking needs.

Many digital banking services are implementing AI technology in their platforms, such as the neobank Dave. Dave’s CEO and Founder, Jason Wilk, says, “AI will become more pervasive across all functions, from marketing and risk management to member support, as neobanks discover effective ways to enhance the customer experience and increase productivity without adding cost. We’re witnessing impressive outcomes from our proprietary AI-driven underwriting model.”

Digital banking by age

Digital banking is somewhat more popular among younger generations, though it’s the preferred method of banking among all generations. About three quarters (74 percent) of millennials prefer to bank digitally, the highest of any generation, according to the ABA.

Here’s how use of digital banking channels (categorized as online and mobile banking) as consumers’ primary method of banking differs across age groups:

Digital banking by race/ethnicity

According to the FDIC, households made up of two or more races are most likely to use mobile banking as their primary method of accessing bank accounts, and white households are most likely to use online banking primarily.

Over half (52.3 percent) of multiracial households reported mobile banking as their primary method, while 45.4 percent of Black households and 41.1 percent of white households reported the same. Meanwhile, 25.8 percent of white households primarily bank online, compared with 25.7 percent of Asian households and 12.1 percent of Black households.

• As of 2023, mobile banking is the primary choice of account access for 48 percent of U.S. consumers, making it the most prevalent banking method. (ABA)
• Digital wallets, such as PayPal and Apple Pay, continue to grow, with about 60 percent of consumers saying they used a digital wallet at least once in the past month. ( Banked )
• Of millennials and Gen Zers, 45 percent say they only bank digitally. ( BMO )
• Digital banking isn’t only important for ease of access – 59 percent of consumers say they want digital banking services to include financial literacy tools and resources. (BMO)

Online banking

Online banking makes it easy for customers to open and check up on their bank accounts from any location where they have internet access. In addition to digital-only banks, many traditional banks offer online accounts too, such as the 360 Checking account from Capital One .

Without the cost of establishing and operating physical branches, online banks can redirect those funds elsewhere, such as yields offered on savings products or ATM fee reimbursements . Most of the top savings account rates are offered by online bank accounts.

According to Bankrate’s savings rates survey, 30 percent of consumers say the reason they don’t have an online savings account is they’re concerned about the security of their money. Online banks are just as safe as traditional banks, as long as they’re insured by the FDIC, which covers up to $250,000 per depositor, per account type. Bank websites are encrypted to prevent cybercrimes, and they typically require multi-factor authentication to ensure that no one hacks into your accounts.

Some online banks focus on a particular cause or consumer group. Limelight Bank , for example, invests the deposits from its certificates of deposit (CDs) into solar panel initiatives. Valley Bank , a regional bank with online services, has accounts specifically designed for those working in the cannabis industry, including cultivators and wholesalers of cannabis.

Here are some of Bankrate’s picks for the best online banks :

Online banking by generation

Younger consumers are gravitating more toward online-only banks. The highest percentage of those interested in online-only banking is among those ages 18-24 – 42 percent say they’re either very likely or somewhat likely to use an online-only bank for their primary bank account, according to CivicScience data . Those ages 55 and above are the least likely to do so, at 11 percent.

Mobile banking

Many digital banks offer mobile apps where customers can complete basic banking activities, such as checking their balances and transferring funds between their own accounts or to peers.

Mobile banking as a primary method of accessing bank accounts has increased greatly in recent years. In 2017, it was the primary method of banking for 15.1 percent of Americans, according to the FDIC; this has since increased dramatically, reaching 48 percent (from ABA data), becoming the most prevalent primary method.

The benefits of mobile banking include:

• Convenient access : You can access the bank’s mobile app anywhere there’s an internet connection.
• Mobile wallets : Bank accounts can be connected to a digital wallet , such as Apple Pay, to make contactless payments in stores or online.
• Fraud alerts : Mobile bank apps frequently come with a variety of alerts that users may set up to notify them of any suspicious activity or large transactions.
• Send money between peers : You can connect your bank account to a peer-to-peer (P2P) payment app to send money to friends and family with a few taps. Many banks even have Zelle , a popular P2P app, built into their mobile banking app.
• Pay bills : Some mobile banking apps allow you to set up mobile bill payments . You just need to add the biller’s information to make a payment to them.
• Deposit checks easily : You can deposit checks through a mobile app by taking pictures of the front and back of the check. The images are processed by the bank to make sure the check is valid.
• Predictive budgeting tools : More and more frequently, mobile banking apps are using AI to analyze and predict users’ spending habits. The apps can then turn its analysis into actionable advice and insights on how to budget more effectively.

Here are some of Bankrate’s picks for the best mobile banking apps :

• About eight-in-10 (81 percent) of consumers have used a mobile device to manage their bank account at least once in the past month – that percentage is even higher, at about 90 percent, for adults ages 18 to 44. (ABA)
• Over half (59 percent) managed their bank account from a mobile device at least three times in the past month. (ABA)
• Up from 34 percent four years ago, now 60 percent of consumers say they’ve used a mobile app to make a payment or transfer money in the past year. (ABA)
• Mobile banking was the primary method of account access for 48 percent of Americans in 2023, compared with 9 percent who primarily visited branches. (ABA)
• The most valued mobile banking feature to users is the ability to lock a lost or stolen card, with 83 percent considering it critical or important; the second-most valued feature is mobile check deposit (79 percent). ( Mitek Systems )
• Even as mobile banking becomes more commonplace, 80 percent of users have concerns about their personal information being compromised due to their reliance on mobile banking. (Mitek Systems)

How to open a digital bank account

Opening a bank account online is not too different from opening an account at a branch. The required documentation is generally the same, and it doesn’t take long to do.

First, make sure to find an account that fits your needs. One way that digital bank accounts differ from traditional accounts is that they may offer much higher yields and lower fees. The market for savings accounts is much more competitive with digital banks.

Because the account is digital, you won’t need to worry about looking for local branches. However, you may want to consider access to ATM networks , so that you can easily take out cash.

When submitting an application for an account, make sure to have the following information prepared:

• Social Security number
• Driver’s license or government-issued ID
• A bill with your name and address on it
• Other bank account and routing numbers to fund the new account

Once your application is approved, you’ll need to fund the new account. A common way to do this is by linking an external account and transferring funds into the new account. You may also be able to fund the account by making a mobile check deposit or by sending money through a P2P app, such as Zelle or PayPal.

Frequently asked questions

What is digital banking, what is the difference between digital banking and digital-only banks, what is mobile banking and how does it work, are online banks safe, what is a neobank, related articles.

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Digital Progress and Trends Report 2023

Report chapters, related links, connect with us.

Digital technologies are transforming economies, creating jobs, and improving lives. They have dramatically changed communications, business, health, education, finance and more.  

Yet the digital divide remains stark and is becoming synonymous with a development divide. Billions of people around the world are still offline, and digital advancement has been uneven, exacerbating the gap between the digital haves and the have-nots.  

This report tracks global progress of digitalization and countries’ production and use of digital technologies, from digital jobs, digital services exports, and app development to internet use, affordability, quality, and more.  

The report also highlights policy shifts and debates, with a focus on developing countries. Two clear trends have emerged that are shaping our digital future: the importance of digital public infrastructure and the transformative emergence of artificial intelligence.

Closely measuring digital progress, especially in developing countries, will help policy makers and the private sector best direct their efforts to close the digital divide.  

Chapter 1.  Digital Adoption: Accelerating Postpandemic, yet a Widening Divide  

Chapter 2.  The Digital Sector: A Driver of Innovation, Growth, and Job Creation  

Chapter 3.  Digital Infrastructure: The Continual Need for Upgrading and Greening  

Chapter 4.  Digital Public Infrastructure: Transforming Service Delivery Across Sectors  

Chapter 5.  Artificial Intelligence: Revolutionary Potential and Huge Uncertainties

Accelerated by COVID, AI, Digitalization Still Uneven

The World Bank Group's Digital Progress and Trends Report 2023 highlights digital potential and identifies key areas to close the growing gap.

Measuring Digitalization to Close the Divide

These 10 revealing charts illustrate how digitalization can foster economic growth, job creation and more, and how it is advancing, or not, across the globe.

Explore the World Bank's Digital Progress and Trends Report and learn about unfolding global digitalization and its impacts on economies and societies.

Digital transformation can close the digital divide

Press Release in Languages:  Arabic   |  Chinese   |  French   |  Japanese   |  Portuguese   |  Russian   |  Spanish

Interactive Charts:  Digital Adoption   |  Digital Sector Development   |  Digital Infrastructure

The report was supported by the Digital Development Partnership, which aims to advance digital transformation in low and middle-income countries by building strong digital foundations and accelerators, facilitating digital use cases for the digital economy to thrive.

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PwC’s 2021 Digital Banking Consumer Survey

Now that banking customers are digital, where's your national deposit strategy?

Direct banks’ share of primary banking relationships is up 80% since 2019

of consumers would prefer to open a new account digitally but are unable to do so today

of consumers born since 1996 (Gen Z) say their primary bank is where they hold their main check

Over the past year and a half, many bank customers got a lot more comfortable with digital interactions, and spent less time in branches. What if they never come back?

We’ve been looking into the minds of US financial services consumers since 2012, surveying groups about their banking, borrowing, payment, insurance and investing habits and preferences. We conduct this research to help us understand what retail buyers want, need and do when choosing and interacting with financial institutions. This year, PwC’s 2021 Digital Banking Consumer Survey canvassed 6,000 retail consumers. We found important changes in both how and where these customers do their banking. These shifts hold important implications for financial institutions of all sizes.

Crucially, we believe that few banks can continue to excel on the basis of their pre-COVID geographic footprint alone, and that virtually every bank should now be thinking about implementing a truly national deposits strategy. Fortunately, the market shake-up is also introducing a lot of new opportunities for banks far beyond the large market leaders. If you understand the needs of your target customers and build your value proposition accordingly, they can come.

US consumers are changing how and where they bank

• Digital banking
• Digital account opening
• Direct banks

More consumers banked digitally: 61% interact weekly on digital channels

The pandemic has altered the way in which US consumers tend to interact with their financial institutions, with an overall shift toward digital. While this is the continuation of a trend we’ve been following for years, this shift was dramatic.

There’s now a large and growing customer segment that has no interest in branches at all. These digital natives —consumers who are digitally engaged, with a preference for avoiding branches altogether—now represent 32% of those we surveyed, up sharply from 26% in early 2020. Meanwhile, there was a sizable and offsetting decline in digital adopters: consumers who are primarily digitally engaged but like having the option of using a local branch. This year, many of these consumers dropped the need for the branch security blanket or, to a lesser extent, reverted to using a nearby branch for most of their banking activities.

We’ve identified two types of consumers who like going to branches: those who are “phygital”—active users of both digital and branches—and those who are branch-dependent. As a result of this growing digital comfort and availability, 25% of US consumers now identify as phygital, up from 17% a year ago. This shift neatly mirrors the reduction in branch-dependent users: 35% of the total—compared to 42% pre-pandemic—as more consumers have grown comfortable using web and mobile apps.

The digital gap in account opening: 20-25% forced to use branch but prefer digital

While banks invested heavily in digital over the last year, we still see a gap in meeting customer preference for digital account opening: 20-25% of consumers would prefer to open a new account digitally but are unable to do so today. For example, 21% of those opening a new deposit account (e.g., a savings account or CD) would prefer to do this digitally, but are unable to do so at their current bank.

Branches still have their place for many users: 33% prefer the branch for certain activities. Although they were forced to use digital channels during COVID, two in three customers still find branches to be a meaningful channel to interact with their financial institutions, especially for activities like account management or financial research. And while digital channel use accelerated, there’s still a meaningful customer segment (35%) reporting that they would not use a bank that doesn’t have a nearby branch.

US consumers are also changing where they bank

The pandemic has accelerated the most recent trend of primary bank relationships shifting away from regional and consumer banks to direct banks, which exist entirely online. This suggests even more challenges for traditional financial institutions, showing that consumers are increasingly open to rethinking everything about how they manage their financial lives.

Direct (or digital) banks now make up 20% of all primary bank relationships in the US, up from 10% in 2019. Large traditional banks have continued to hold steady at around 42% of consumer relationships. Those in the middle—regional banks, community banks and credit unions—continue to be squeezed. Customers who prefer their community banks value low fees and customer service, while customers who choose digital banks do so for a diverse product set and as a result of friend/family referrals.

We’re also seeing a generational shift in the definition of a primary bank, with checking accounts becoming less dominant and advice and social support growing in importance:

• While 60% of baby boomers (consumers over 55) assume that their primary bank is where they hold their primary checking account, only 34% of Gen Z consumers (ages 18-24) say the same.
• In contrast, 26% of Gen Zers say their primary bank is the company that they trust to give the best advice, compared to just 7% of baby boomers.
• There’s also a small—but growing—share of consumers who say their primary bank is the one that acts in the best interest for the environment and society, including 14% of Gen Zers and 12% of millennials (ages 25-39). But only 2% of baby boomers feel the same.

Share of account holders who cite a non-bank as their primary financial institution has doubled in the past year

Nontraditional providers of banking services like retailers, social media providers and automakers have been rapidly gaining traction, especially among younger consumers. This may be happening faster than many bankers think: 57% of millennials and 64% of Gen Z consumers now say they have a financial account with a nontraditional institution. In fact, 17% of those with accounts with nontraditional financial institutions now identify this as their primary financial institution, double what we saw just a year ago.

To be sure, traditional financial institutions still hold great weight, but the nontraditional players—sometimes known as neobanks, personal finance companies, fintechs, direct banks and peer-to-peer lenders—seem to have opened the door to others. One in four consumers say they’d use a retail company for banking activities, and they’re increasingly likely to buy bank products from a social media provider or automaker.

Direct banks are no longer a niche play; to a growing number of consumers, they are more relevant than regional or community banks.­ Peter Pollini Banking and Capital Markets Consulting Leader, PwC US

Every bank should be building a specialized national offering

For decades, most banks used geographic proximity as their primary calling card and it worked fine—until it didn’t. Consumers have been finding their way toward alternative banks with little or no physical presence, and the growth in non-financial accounts seems to have come at the expense of both regional and community banks. This shift is even more pronounced by age: Younger consumers are even less impressed by physical branch presence, and they are even more open to alternative providers. We therefore expect banks’ geography to become increasingly less relevant over time.

Some financial firms will use this shift to dig even deeper into their local roots and find ways to make their branch presence meaningful to a profitable segment of customers, but it will be an uphill battle. We believe that, for most banks, the alternative—pursuing a well-defined customer niche with a relevant offering, without regard to geography—is not only a useful defensive strategy but an opportunity to grow.

Leading banks have been seizing the opportunity to package trusted advice and convenience through solutions rather than products. These solutions are:

• Tied to affinity groups, a particular industry or a particular behavior.
• Specific and specialized, and purposefully broader than just financial products and services.
• Offered nationally through marketing that targets well-defined groups of consumers.
• Often delivered through strategic partnerships.

We’re already seeing interesting examples of this at work:

• Zions Bank offers a holistic professional practice financing solution for medical professionals aspiring to start their own practice, expand a medical office, buy new equipment or refinance existing loans. Using an online application, the bank is pursuing dentistry, veterinary, optometry and medical practices.
• Valley Bank has announced a specific solution for cannabis-related business, with a cashless digital payment platform intended to address the needs of this largely unbanked sector. Valley Bank expects to serve dispensaries, cultivators, testing labs, wholesalers, CBD/hemp businesses and armored car services.
• Chime, a fintech provider that aims to support “everyday Americans who aren’t being served well by traditional banks,” offers a secured credit card for those looking to build a credit history. While the product category isn’t new, the marketing emphasis on eliminating fees and interest is.
• Nerve is a neobank targeting independent musicians, linked to a music streaming platform. The company is positioning its offering as building strong communities by providing a private networking feature to help professional musicians find each other, make payments and collaborate.

Making it happen: the capabilities you’ll want to support a national offering

In theory, migrating from a geographic-centric marketing approach to a segment-centric marketing approach shouldn’t be all that different. In practice, we recommend that financial institutions beef up their operations to strengthen some key capabilities, including:

An in-house, dedicated product development team.  It isn’t enough to say that your service offering is meaningful for elementary school teachers or locksmiths. You need to demonstrate to your target audience that you understand their needs and that your solution offers benefits that other banks don’t. You’ll want to have a team that is responsible for designing and iterating on offers, and that has the capability to capitalize on customer needs to introduce relevant products and features.

An active team focused on partnerships and experiences.  Banks have typically been fairly self-contained in their marketing. But as customers gain experience with interconnected ecosystems in other industries, they’ve shown that they’re open to new buying influences. For banks, this offers new ways to reach beyond conventional products and strengthen relationships with customers—but it may also raise new issues around business models, cybersecurity and more. You’ll want to build up a competence around navigating these issues as you define the boundaries of your target market.

A robust customer data platform.  Customer segmentation has gotten a lot more sophisticated in recent years. All customers now expect differentiated experiences, drawing on what they’ve seen from other micro-targeting campaigns. There are tools to make this emerging trend simpler for you, such as PwC’s no-code  Customer Link  product. Customer Link is a customer data solution that unifies your own data with PwC’s extensive third-party data to help you adapt to changing demands. The goal of these tools is to build an integrated view of your customers, often drawing on AI and using machine learning models to enhance precision.

A modern bank architecture.  Legacy bank systems were designed for a very different environment, one where products and channels and volumes were comparatively static. To compete effectively in the national market, you’ll almost certainly need a platform that is API-enabled, allowing you to rapidly adapt to any new opportunities, whether internal and external. Cloud-based systems now make it far easier to develop and test products, scaling up and down resources quickly as demand rises or falls.

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Why now? Because existing banking relationships have become more vulnerable

As our survey shows, customers are rapidly getting more comfortable with digital banking tools, and they aren’t looking back. Historically, banks have counted on the relative stickiness of their relationships and their geographic presence to keep them in business. But if buyers don’t care about those attributes—which is increasingly the case—then a competitor’s targeted digital offering may make it far easier for it to pick off your most valuable customers.

However, the competition is not between you and digital start-ups. You’re now competing with anyone who understands your customers’ needs with more granularity than you do and designs their offerings accordingly. This could be a bank in Maine, Florida, Arizona or Alaska, even if your primary territory is in the center of the country.

There’s still time to adapt, if you’re prepared to rethink geographic limitations and are ready to build on the capabilities and specializations you already have. In fact, we believe that this year’s Digital Banking Consumer Survey points to new organic growth opportunities. In the wake of the pandemic, customers have been settling into new buying patterns with long-term implications. How will you respond?

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Financial Services Industry Leader, PwC US

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Principal, PwC US

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Partner, PwC US

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Digital Banking Transformation Trends for 2023

Digital transformation remains a high priority in the banking industry for a number of reasons. The primary one is that it can help banks to improve the efficiency and effectiveness of their operations. By streamlining processes and automating tasks, financial institutions can improve the ability to be future-ready and to be able to improve customer and member experiences.

Additionally, digital banking transformation can help banks and credit unions to better compete in a rapidly changing financial ecosystem. In recent years, the banking industry has faced increasing competition from fintech companies and other non-traditional players, including big tech organizations. By embracing digital technologies and processes, financial institutions can improve their offerings and how they deliver services.

Finally, digital banking transformation helps financial institutions reduce costs and increase profitability. By automating processes and leveraging modern technologies, including automation, bank institutions can reduce their reliance on manual labor and lower operating costs. This helps maintain healthy margins, redeploy human and monetary assets, and stay competitive in a challenging market.

The questions become:

• What stage are financial institutions in their digital banking transformation journey?
• What are the digital banking transformation priorities for 2023?
• What stands in the way of updating back offices for improved top-of-glass experiences?
• 6 Digital Banking Transformation Trends for 2022
• Executing What’s Possible With Digital Banking Transformation
• The 6-Step Survival Guide to Digital Banking Transformation

Digital Banking Transformation Maturity

Financial institutions have made significant progress in their digital banking transformation journeys, but the level of maturity varies. Some organizations have fully embraced digital technologies and have implemented a wide range of digital solutions, while others are still in the early stages.

As with much of the change taking place within the financial services industry, the best results and highest level of maturity have been present at the largest financial institutions. Modest success has also been seen at the smallest banks and credit unions, while most midsized firms ($10 billion – $100 billion) have been lagging the industry as a whole.

Digital Banking Transformation Imperative:

Financial institutions have made significant progress in their digital banking transformation journeys, but the level of maturity varies among institutions based on size, commitment to change and investment levels..

There are several factors that can influence the level of maturity of financial institutions in their digital banking transformation journey. These include the size and complexity of the organization, the level of investment in digital technologies, the level of regulatory compliance already in place, and the level of customer demand for digital banking capabilities.

The good news is that there are a multitude of options available to work with third-party providers that can deploy digital banking transformation solutions faster than can be done if developed internally. Incumbent institutions can also partner with fintech and big tech competitors while modernizing their systems and processes at the same time.

When Digital Banking Report asked financial institutions worldwide about their level of digital banking transformation maturity, we found that 18% of institutions believed their solutions were deployed at scale, with 61% stating that their solutions were partially deployed. Of concern was that 38% of organizations that believed they had deployed digital banking transformation solutions at scale were not receiving the level of results expected. Similarly, 31% of organizations with partial deployment had not received the results expected.

In many cases, the lack of success can be attributed to a lack of pre-planning of initiatives with a focus on results desired. In some cases, there was not an adequate level of investment made in the desired solution.

At every level of digital banking transformation maturity, financial institutions are increasingly recognizing the importance of digital banking transformation strategies to become future-ready. Many financial institutions have invested heavily in digital technologies in recent years and are actively working to improve the customer experience through the use of digital channels. However, there is still a significant amount of work to be done in order to fully realize the benefits of digital transformation.

Digital Banking Transformation Trends

As we enter 2023, there are several underlying trends impacting the prioritization of investment and the progress made in digital banking transformation. One of the biggest underlying trends is the continued growth in the use and customer expectations around digital banking. As more and more consumers embrace smartphones and other mobile devices, banks are increasingly focusing on developing mobile-first strategies and offering services optimized for mobile users. This includes capabilities such as mobile payments, mobile check deposits, and other features that make it easier for customers to manage their finances on the go.

A trend that is receiving a great deal of attention, but is still very challenging for organizations to embrace and deploy, is the use of artificial intelligence (AI) and machine learning. Beyond using AI and machine learning to enhance cybersecurity and reduce fraud, banks and credit unions are using advanced analytics to improve the accuracy and efficiency of operations and to provide personalized experiences for customers. This includes providing time-sensitive personalized product recommendations to customers to improve financial wellness.

Key Digital Banking Transformation Trends:

The focus of digital transformation revolves around the customer journey and the need for increased engagement in a safe and secure environment..

When Digital Banking Report asked global banking executives about their digital banking transformation progress in the past year, the greatest progress was around leadership support of digital transformation efforts (34% with significant progress) and improving the customer experience and engagement (24% with significant progress). Interestingly, the lowest level of progress was in the area of transforming legacy systems (60% having moderate (43%) or significant (17%) progress).

It was encouraging to see that, while the improvement in the use of data, analytics and AI was not as high as expected, 75% of organizations stated they had made moderate or significant progress.

When DBR asked global financial institution leaders what digital banking transformation areas of emphasis would be extremely or very important in the next three to five years, cybersecurity (96%), mobile experience (91%), mobile channels (87%), and data and analytics (83%) were the top priorities. As more and more financial transactions are conducted digitally, it is becoming increasingly important for banks to prioritize security and protect their customers’ data from cyber threats. As a result, financial institutions are investing in advanced security technologies, such as encryption and biometric authentication, to keep their customers’ data safe and secure.

Another area of primary focus was open banking. Open banking has the power to enable banks to offer more innovative products and services to their customers, as well as to better compete with fintech companies and other non-traditional players in the market.

When DBR asked financial institution executives about the success of their digital transformation efforts, organizations overwhelmingly believed their efforts in cybersecurity and supporting digital channels were the most effective. There was significantly lower consensus on the success achieved in the use of social media, the deployment of cloud computing, the use of data, AI and advanced analytics, and the success with open banking APIs.

Overall, these areas of focus and components of success indicate that the digital banking space will continue to evolve and change in the coming years. Banks that are able to adapt to these changes and leverage emerging technologies will be best positioned to succeed in this increasingly competitive market.

Challenges to Digital Banking Transformation Success

In research conducted by DBR, there are several major challenges that financial institutions face as they embark on their digital banking transformation journey:

• Cultural resistance to change : Digital banking transformation requires significant changes to the way an organization operates, which can be difficult for existing leadership and current employees to accept. In both our research and in interviews done for the Banking Transformed podcast , we have found that it can be challenging to get everyone on board with the changes needed for the future and to ensure that the entire organization is aligned with the digital transformation strategy.
• Limited resources : Financial institutions may struggle to allocate the necessary resources to support digital transformation initiatives, especially during times of economic uncertainty. This becomes more challenging when significant investments in technology or training are required.
• Complexity : Financial institutions often have legacy systems that are mired in past business strategies. Frequently they are difficult to integrate with newer digital technologies. This can make it difficult to implement new digital solutions unless the solutions are integrated incrementally. This can introduce new complexities.
• Data and security concerns : As  banks and credit unions managed more and more data, concerns about data privacy and security grow. Ensuring the security of this data is imperative, but it can also be a challenge as organizations implement new digital technologies.
• Regulatory compliance : Financial institutions must adhere to complex and ever-changing rules. They become more challenging as organizations implement new digital banking transformation technologies.

Overall, financial institutions must be strategic and proactive in addressing these challenges as they work to transform their internal and external operations through the use of modern digital technologies.

Rethinking Existing Business Models

As digital banking transformation occurs, financial institutions must consider changing their existing business model to meet the needs of a changing marketplace and to remain competitive as new players enter the marketplace. When we asked financial institutions worldwide about their existing and future business model, the biggest change was in the reduction of organizations that believed they would be a universal player in seven years (from 60% today to 42% in 2030).

The biggest shift in business model deployment was the expected increase in open platform players (from 8% to 26% of financial institutions in 2030). This could result in diversification of product offerings by banks and credit unions. Organizations can change up their product offerings by offering a wider range of financial products and services, such as wealth management and investment services or by serving additional customer segments.

Major Shifts in Banking Business Models:

Financial institutions are rethinking the value they provide the marketplace and the best way to deliver this value at scale. the business models of many financial institutions will undergo massive change in the near future..

There can also be modest modifications to existing business models in order to respond to a changing market. As more people conduct financial transactions digitally, banks and credit unions could resell their digital banking capabilities, such as mobile banking, digital account opening and digital payment options, to other legacy banks or alternative providers.

It is clear prioritizing the customer experience will be at the foundation of the evolution of business models going forward. Banking institutions will focus on improving the customer experience by offering personalized services, improving the value proposition, simplifying the distribution channels, and using technology to make banking more convenient and efficient.

Overall, the key to successfully rethinking a banking business model will be to stay attuned to the changing needs and preferences of customers, and to be open to exploring new opportunities and technologies that can help the business stay competitive and relevant at a time of ongoing change.

As financial institutions prioritize digital transformation initiatives, they must take into account the integration of the following megatrends:

• The growing importance of mobile devices and the increasing adoption of e-commerce.
• The importance and impact of social media in marketing and customer engagement.
• The threat of cybercrime and importance of cybersecurity.
• The benefits of big data, artificial intelligence (AI) and machine learning, and the value of the democratization of insights.
• The potential of cloud computing to improve speed, scalability and efficiency.
• The changing nature of work, both on employees and customers.
• The future of emerging technologies such as the internet of things, virtual and augmented reality, and Web3 and the vision of the metaverse.

Innovation in Retail Banking 2020

Special Report DOWNLOAD A FREE SINGLE-USER COPY OF THIS REPORT

November 2020

89 pages, 38 tables/charts

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The pandemic ignited the fires within financial services, creating an innovative spirit that many organizations only dreamed of before COVID-19. Even in a remote work environment, banks and credit unions moved faster and took greater risks out of necessity, as consumers needed ways to conduct financial activities without branches.

As opposed to creating solutions that were completely new, many innovations simply accelerated the digital transformation activities that were already underway … but moving at a snail’s pace. For instance, many organizations created the digital new account opening and digital loan application processes that consumers desired leveraging outside tools that were readily available before the pandemic.

Despite this focus on innovation during the crisis, our research found that organizations rated themselves lower in innovation and digital transformation maturity than in 2019. This was most likely because other industries moved even faster to meet the expectations of the digital consumer.

The question remains as to whether legacy financial institutions can avoid reverting to the outdated policies and risk-averse culture that inhibited innovation and digital transformation in the past. The challenge is made greater because the majority of bankers believe the industry will experience an economic downturn as a result of COVID.

Whether there is a significant economic impact to the banking industry is yet to be seen, but to succeed in the digital transformation journey, innovation needs to be part of the overarching culture within an organization. Not relegated to a ‘innovation lab’ or one or two product groups, innovation must be encouraged across product lines, with the desires of the consumer taking center stage. More importantly, existing back office processes must be rethought to avoid simply ‘faking digital’.

This year’s Innovation in Retail Banking report is again sponsored by Infosys/Finacle in cooperation with Efma . This is the 12 th year of this report, and it is arguably the most important edition, because of the significant changes brought on by COVID.

As opposed to being a threat to the industry, the pandemic should be viewed as a once-in-a-lifetime opportunity that innovation leaders are best positioned to take advantage of. By exploiting the innovative spirit, focus and teamwork unearthed at the beginning of the crisis, banks and credit unions should continue to give their best people the power to innovate at will, positioning organizations to be more competitive with the fintech and big tech firms that continue to encroach on traditional lines of business.

Those organizations that can maintain the innovative momentum will be in the best position to meet the needs of the digital consumer and thrive in a world forever changed by COVID.

Advanced Analytics, AI, Analytics, Artificial Intelligence, Bank, Banking, Big Data, Branches, Coronavirus, COVID-19, Credit Union, CRM, Customer Experience, CX, Digital Banking, Digital Lending, Digital Marketing, Digital Transformation, Engagement, Fintech, Innovation, Marketing, Mobile Banking, Payments, Personalization, Technology, Trends, Voice Banking, Voice-First

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International Journal of Quality and Service Sciences

ISSN : 1756-669X

Article publication date: 4 February 2022

Issue publication date: 3 May 2022

This study aims to demonstrate digital banking’s influence on customers’ evaluation of service experience and develop a framework identifying the most significant variables of digital banking that influence the financial performance of banks.

Design/methodology/approach

This structured review of literature, guided with the preferred reporting items for systematic reviews and meta-analyses framework, takes a digital banking perspective to identify 88 articles published between 2001 and 2021, examining distinct aspects of digital banking and their impact on financial performance.

Customer experience (CE) is determined by functional clues (functional quality, trust and convenience), mechanic clues (website attributes, website design, perceived usability) and humanic clues (customer complaint handling). The study is furthered to combine CE with the service profit chain model. This study also fills the gap to understand the use of “gamification” in technology-driven banking services to enhance CE. Finally, an integrative framework is proposed to link technology-related factors (digital banking clues and gamification), customer-related factors (CE, customer satisfaction and customer loyalty) and performance-related factors (financial performance).

Practical implications

The study conceptualises a “total” CE framework that banks can use to enhance their online presence. Banking service providers could also analyse their financial results based on digital banking’s impact on customers. Besides, banks can use this framework to strategically place “game-like features” in their digital platforms.

Originality/value

This study attempts to significantly contribute to the digital marketing literature related to CE with banks. It is one of the first studies to determine gamification explicitly in banking literature.

• Customer experience
• Digital banking
• Customer satisfaction
• Customer loyalty
• Financial performance
• Gamification
• Internet banking

Acknowledgements

Funding: Authors have not received any funding support to complete this work.

Conflict of interest statement: The authors declare that they have no conflict of interest.

Chauhan, S. , Akhtar, A. and Gupta, A. (2022), "Customer experience in digital banking: a review and future research directions", International Journal of Quality and Service Sciences , Vol. 14 No. 2, pp. 311-348. https://doi.org/10.1108/IJQSS-02-2021-0027

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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2022 Digital Banking Trends & Predictions

• Date: December 01, 2021
• Mark Schwanhausser
• Emmett Higdon
• Dylan Lerner
• Report Details: 14 pages, 3 graphics
• Research Topic(s):
• Digital Banking
• Digital Strategy & Experience
• Mobile & Online Banking
• PAID CONTENT

Javelin’s Digital Banking team has spotlighted three interwoven trends that point to 2022 as a pivotal year in redefining  a primary banking relationship, speeding the evolution of mobile banking, and fortifying the fundamental role that financial fitness will play in building engagement, trust, and long-term relationships that customers value.

The financial-services industry reached an important tipping point in 2021: U.S. consumers had more than half of their financial relationships with nonbanks. This tectonic shift underscores the erosion of primary-bank relationships, why leading FIs must prioritize mobile engagement over transactional competence, and why financial fitness will be essential in developing ongoing advice-driven relationships.

Although the pandemic has boosted the volume of digital activity, the reality is that mobile banking is largely stuck in Phase 2 of Javelin’s Mobile Banking Maturity Path—meaning that FIs provide transactional competence but fail to develop deeper, lasting banking relationships. Unlocking deeper mobile engagement makes 2022 a critical year for delivering integrated, automated, personalized insights and calls to action that position the mobile app as the go-to channel for an expanding range of interactions.

Financial fitness will be a key battleground as FIs seek to boost engagement; take fledgling steps down the path to providing proactive, personalized, and actionable financial insight; and counter financial apps that offer a financial service rather than a box of financial tools. In 2022, FI and vendor road maps will focus on five key areas: automated saving, aggregation, credit score management, gamification, and insight “feeds.”

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DIGITAL BANKING ECOSYSTEM: These are the key companies, strategies, and investments banks are making for digital transformation in 2020

The banking industry is in the grips of an identity crisis. Leaders of the world's largest banks — such as Citi, BBVA, and Goldman Sachs — have begun describing themselves as technology companies with banking licenses.

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However, this description is still aspirational. Executing the vision will require billions of dollars in investments, the restructuring of teams, a reimagining of the entire banking technology stack, and the adoption of a far more customer-centric business view.

The stakes of failing to transform are high: Accenture projects that 35% of all bank revenues could be at risk from more tech-savvy competitors like fintechs as soon as 2020 for incumbents that fail to up their game.

As a result, a wave of digital transformation is now sweeping the banking industry, as incumbents shore up against consumer demand and competitive pressures. Major banks have already announced multibillion-dollar, multiyear digitization projects: By 2021, global banks' IT budgets will surge to $297 billion, up 14% from $261 billion in 2018, according to Celent.

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Many incumbent banks are opting to decrease their branch budgets and networks and reinvest their resources in digital channels such as mobile instead to cater to current consumer preferences, and are enlisting the help of tech-savvy software vendors to modernize their tech stacks from top to bottom as part of this process.

In the  Digital Banking Ecosystem  report, Insider Intelligence explores the incumbent banking landscape as a whole, and the third parties banks are calling on to help their transition to digital. We then take a closer look at the three biggest drivers for incumbent banks' digitization push: digital-native competitors like neobanks and Big Tech companies; changing consumer behaviors and banking channel preferences; and a growing array of cybersecurity threats.

Lastly, we examine what incumbents are already doing today to transform themselves into digital-first organizations to compete in a customer-centric, data-driven global economy, and how they are learning to meaningfully measure the progress of their transformations. 

The companies mentioned in this report include: Acronis, Amazon, Ant Financial, Apple, Ario, Banco Galicia, Bancorp, Bank of America, Bank of England, Barclays US Consumer Bank, BBVA, BNP Paribas, Caixa Geral de Depositos, CaixaBank, Capital One, China Construction Bank, Citigroup, Citizens Bank, Compliance.ai, CSI, Dave, Detroit Fintech Bay, Deutsche Bank, Diasoft, Emirates NBD Bank, Finastra, Finn AI, Finxact, First Direct, FIS, Fiserv, Flagstar Bank, Forcepoint, ForSee, Forward Networks, Geezeo, Gemalto, Goldman Sachs, Google, Grab, Hello Bank, Help Systems, HotJar, HSBC, IBM, ICBC, Infosys, ING, ING Direct, Intesa Sanpaolo, Jack Henry, JPMorgan Chase, Kenna Security, Lloyds Bank, Lyft, Midwest Bank, Mission Bank, Monzo, N26, Nationwide, NatWest, nCino, ObserveIT, OnDeck, Openbank, Osano, Personetics, PNC, RBS, Reciprocity Labs, Saga, Santander, Sberbank, Square, Starling Bank, Strands, Tanium, Temenos, Tencent, Thomson Reuters, Thought Machine, Tink, TSB, Uber, United Income, US Bank, Wells Fargo, Zelle, and Zopa. 

Here are some of the key takeaways from the report:

• The number of US consumers considering switching banks in the next 12 months increased by 86% from a year before, from 6.9 million to 11.9 million, per Resonate, with consumers citing the need for better digital banking services and more personalized products and tools as major motivators.
• Meanwhile, tech giants like Google and Amazon are poised to grab up to 50% of the $1.35 trillion in US financial services revenue from incumbent banks, per McKinsey, leveraging their tech expertise to lure away customers.
• Once the most widely used banking channel in the US, branch use will drop at a compound annual growth rate (CAGR) of -2.01% between 2019 and 2024, per Insider Intelligence projections.
• Meanwhile, mobile banking, the least-used banking channel in 2008, is expected to grow at a CAGR of 2.83% between 2019 and 2024, the highest among all channels. 
• To digitally transform, banks need to join forces with partners, enemies, and frenemies alike. Vendors will be key to the modernization of banks' IT, with specialists catering to each layer: 81% of banking executives surveyed by Finextra and the Euro Banking Association cited working with partners as the best strategy for achieving digital transformation goals. Banks' growing IT budgets reflect their changing priorities: By 2021, global banks' IT budgets will surge to $297 billion, up 14% from $261 billion in 2018, according to Celent.
• Banks' digital transformations are already well under way, and incumbents are making massive changes to the way they operate and plan for the future to compete in a digital economy. They're doing this by embracing digital-ready innovation models; adopting new business models like open and direct banking; and reorienting their tech stacks around the digital customer experience.

In full, the report:

• Outlines the incumbent banking landscape and its components, and the structure of the banking tech stack and the vendors supplying each of its layers.
• Explains the biggest drivers behind banks' digital transformations, especially the rise of tech-savvy competitors, shifts in consumer behaviors, and a growing number of cybersecurity threats.
• Highlights the steps banks are already taking to turn themselves into digital-first, data-driven, and customer-centric organizations. 
• Evaluates the progress incumbents have made towards digitization, and how deeply they've embedded themselves in the emerging cross-industry digital banking ecosystem.

Interested in getting the full report? Here's how you can gain access:

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Accelerating digital transformation in banking Findings from the global consumer survey on digital banking

Digital engagement is key to optimizing the consumer experience

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Satisfaction with banking is relative

• The rate of digital adoption is encouraging

The digital-emotional connection

Segment characteristics are not uniform by country, more real in digital and digital in real, the case for accelerating digital transformation.

Consumers around the globe expect their banks to act and interact more like top technology brands. Our latest global consumer survey on digital banking reveals where the gaps are—and what banks can do to meet heightened expectations.

The banking industry is in a digital arms race. In 2018, banks globally plan to invest US$9.7 billion to enhance their digital banking capabilities in the front office alone. 1  For many retail banks, online and mobile channels have become as important—if not more important—than branches and ATMs.

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Banks around the world are already realizing how investments in digital technologies could benefit customer acquisition and satisfaction. For example, Bank of America currently receives more deposits from its mobile channel than it does from its branches. 2 The bank’s CEO Brian Moynihan recently stated that investing in digital banking capabilities has helped improve customer satisfaction. 3

But satisfaction is relative. As leading technology brands, such as Apple, Amazon, or Google, have become the gold standard for digital engagement, many consumers now have a stronger emotional connection with these brands than they have with their primary banks, as we will see in the subsequent sections in the report. If banks want to keep up, they have to engineer the digital experience they offer to make these emotional connections, which, ultimately, could translate into sticky interactions and more profitable customers.

The Deloitte Center for Financial Services surveyed 17,100 banking consumers across 17 countries in May 2018 to measure the current state of banks’ digital engagement. We asked respondents how frequently they use different channels and services, with an eye on digital transactions. We also captured consumers’ expectations and perceptions of digital banking capabilities, and the likelihood of using additional digital banking services in the future. (See interactive for more information and a breakdown of results by country.)

[ View interactive graphic fullscreen ]

The survey results support Deloitte’s belief that restructuring organizations around different stages of customer interaction will be the next frontier for digital banking. Specifically, this will require integrating digital services across five stages—adoption, consideration, application, onboarding, and servicing—to drive holistic engagement. We believe the results clearly show that banks need to expand their focus beyond increasing and enhancing digital service offerings to transform themselves into truly effective digital organizations.

This study is the latest of a suite of thought leadership efforts by Deloitte that address digital banking, a topic of the utmost importance to the industry’s future (see sidebar, “Digital banking research from Deloitte”).

Of course, banking systems and the behaviors of consumers vary across markets in different geographies. As such, we highlight country differences along the way to offer a perspective of consumers’ relationship with their banking institutions in individual countries. A subsequent report and interactive will dive deeper into these geographic differences and their reasons.

About the study and methodology

The Deloitte US Center for Financial Services fielded a global digital survey in May 2018, querying 17,100 respondents in 17 countries. We set minimum quotas for age and gender for each of the 17 countries. The survey emphasized consumers’ digital engagement, including channel preferences for various banking activities and buying new products, their emotional connection to their banks, and other attitudes and perceptions about their primary banks.

To understand whether there were different segments with characteristics within our global sample, we performed cluster analyses of channel usage data for 13,912 eligible respondents. 4 We found that one algorithm in particular yielded the most statistically significant and meaningful results. The input data for the cluster analysis was:

• How frequently the respondents use bank channels: bank branch, ATM, contact center, online banking service, and mobile banking app.
• Which channels they prefer to access a range of services: transactional (withdraw money, pay bills), informational (inquire bank balance, inquire about a bank product, update account details), problem resolution (dispute a transaction, report lost or stolen debit/credit card), and product application (apply for a loan).

The results revealed clear differences regarding digital attitudes and behaviors among consumers. Across the globe, consumers fell into one of three distinct segments: traditionalists , online embracers, or digital adventurers . Please read more about the segment characteristics in “The digital-emotional connection” section later in the report.

The survey data reported are unweighted, and we caution that the interpretations maybe limited to the samples we included in the study.

The Deloitte Center for Financial Services’ global survey of banking consumers confirmed a finding that we have observed in other Deloitte studies: Consumers’ overall satisfaction with their primary banks is generally high. 5 Nearly two-thirds of consumers in our global sample are either completely satisfied or very satisfied with their primary bank. Satisfaction varies country by country, however (figure 1).

Within the Asia Pacific region, for example, consumers in India and Indonesia are more satisfied with their banks than are those in Singapore, Australia, or Japan. In Europe, consumers in Norway and the Netherlands are more satisfied with their banks than are those in Germany, France, or Spain. Comparing satisfaction levels across the Atlantic, consumers in the United States and Canada are generally more satisfied with their banks than their European counterparts are.

These patterns are mirrored when determining whether consumers would advocate for their banks. Nearly two-thirds of consumers in our survey said they would recommend their primary bank to friends and family (figure 1). A higher proportion of consumers in India and Indonesia are likely to recommend their banks than are those in Japan, Singapore, or the United States.

But these questions measure emotional engagement with broad strokes; they do not paint a full picture of customer satisfaction. As banks embrace varied strategies to differentiate themselves, they need to pay close attention to how they make their customers feel so they can build sticky relationships. 6 According to a Harvard Business Review article, emotionally connected consumers are 35 percent more valuable than highly satisfied consumers. 7 In our study, the top 25 percent of respondents who ranked their bank the highest using six positive descriptors also have a higher number of products with their primary bank.

Importantly, though, our survey also showed that banks lag behind other brands in building these emotional connections. Best-in-class digital service providers, including Apple, Google, Amazon, Samsung, and Microsoft, topped the list. Figure 2 shows the percentages of how consumers ranked their banks on these six descriptors compared to these top brands. In short, these results show that consumers feel these favorite brands outperform their banks in providing quality, convenience, and value via an exceptional digitally driven consumer experience.

The rate of digital adoption is encouraging, though transactional in nature

Our survey also indicates that consumers are ready for a higher level of digital engagement from their banks. Many consumers already interact with digital banking channels quite frequently, which is a highly positive development. Although branches and ATMs are still used by slightly more banking customers, online and mobile channels are not far behind. Eighty-six percent of consumers use branches or ATMs to access their primary bank; 84 percent use online banking; and 72 percent use mobile apps to access their primary bank.

But more tellingly, digital channels are used more frequently than branches and ATMs (figure 3) across all generations, and in all countries. This clearly presents an opportunity for banks; if they can improve their digital offerings, they could increase customer engagement.

However, a country-by-country breakdown reveals some curious exceptions. Japan, in particular, stands out from the crowd with only 7 percent using online and 6 percent using mobile banking more than five times a month. This result is not completely surprising, however: A 2016 Meiji Yasuda study revealed that 70 percent of internet users in Japan used cash to pay at a physical store. 8 China and Singapore, both known for populations that are digitally savvy, 9 also fall into this category, but not to the same extent.

Among the other countries surveyed, though, the general trend is that many more banking interactions are made online and via mobile devices than through ATMs and branches. This is a good start. The first step toward improved brand recognition is to get in front of the customer as often as possible.

While the frequency of digital channel usage is a positive sign, there is an important distinction to make here regarding quantity versus quality of interactions. Our survey showed that digital channels are mostly limited to informational and transactional services that have been available through online banking for at least 15 years, such as transfering money, updating account details, and checking account balances.

Many consumers still prefer traditional channels over digital channels for complex or advisory services, however. Of the respondents who filed a complaint with their bank, 42 percent used contact centers, 26 percent used branches, and only 30 percent used digital channels (online or mobile). The trend is also true for applying for new products, especially loans that require multiple verification and documentation steps (figure 4). Interestingly, consumers were split in their preference to use online and mobile channels versus branches when applying for payment cards (debit and credit cards) and basic transactional products (payment and savings accounts).

And although few banks allow their customers to apply for a consumer unsecured term loan or small business loan through digital means, nonbank fintechs have been allowing this for almost a decade and some banks have followed suit. 10 Yet, for the most part, retail banks still require human intermediaries and cumbersome nondigital documents to process loan applications. 11

Further, banks’ “pull” approach versus a “push” approach to digital service could be standing in the way of creating emotionally engaging digital interactions. Today’s consumers still come to the bank’s platform to meet their needs—be it monitoring account details or understanding their spending patterns—and banks tend to react to their needs. Meanwhile, fintechs have shown a better way to digitally engage consumers through a “push” strategy that includes sending them intelligent, tailored insights based on their spending behavior or notifying them about discounts or loyalty offers at nearby retailers. 12 Although banks have made the important step of making the login process easier by having mobile devices remember information in a secure manner, they can invoke more push strategies, such as providing customers with alerts regarding unusual movement in their accounts. 13

To dig deeper into digital engagement, and understand how it varied across customer segments, we ran a cluster analysis (see “About the study and methodology” section). The analysis of nearly 14,000 global respondents 14 confirmed a positive relationship between digital usage and emotional engagement in three distinct consumer segments. We’ve named these groups traditionalists , online embracers , and digital adventurers .

• Traditionalists comprised 28 percent of the sample. They are light digital users who do most of their banking in branches and through ATMs. Nearly one-half of these respondents who check their bank balances used ATMs; a fifth used branches. Of the traditionalists who transferred money from one account to another, one-third used ATMs while another one-third used branches.

Nearly one-quarter of traditionalists have never used online banking to access their primary bank. Their reluctance to use mobile apps is even higher—44 percent have never used mobile apps to access their primary bank. Even among users of online and mobile banking in this segment, only one-tenth have used these channels 10 or more times in a month. Traditionalists also hold fewer products, such as debit and credit cards, than the other segments.

• Online embracers comprise the largest segment, at 43 percent. They are more digitally engaged with their banks than are traditionalists, but prefer online over the mobile app channel for types of transactions that banks have spent years perfecting online, such as balance and transaction inquiries, transferring funds, and paying bills. They have higher product holdings than traditionalists and transact with their banks more frequently, but not all the time; about 20 percent of online embracers accessed their bank online more than 10 times a month, and 25 percent accessed their mobile apps more than 10 times per month.
• Digital adventurers comprised 28 percent of the sample; millennials comprised the highest share of adventurers compared to the other segments. Like online embracers, this group exclusively uses mobile and online channels to inquire about their account, transfer funds, and pay bills; however, many more adventurers are comfortable, and prefer, to perform them on their mobile devices. As an example, 48 percent of digital adventurers transfer money person-to-person (P2P) online and 44 percent do so on mobile apps, while 52 percent of online embracers make P2P transfers online and 37 percent prefer to do so on mobile apps.

Digital adventurers also own many products, but they transact much more frequently than online embracers do. Over half of users of online and mobile banking in this segment have accessed these channels 10 or more times a month. A significant proportion of digital adventurers prefer to use online and mobile channels combined more than visiting a branch to apply for simple products such as debit cards and checking accounts. And although just under 32 percent and 11 percent would prefer to apply for a personal loan online and on their mobile app, respectively, this compares to 25 percent and 7 percent for online embracers and only 17 percent and 6 percent for traditionalists.

Most tellingly, digital adventurers demonstrate the highest levels of satisfaction and advocacy for (are most likely to recommend) their primary banks. And they also generally express a deeper emotional engagement with their primary banks compared to online embracers and traditionalists (figure 5), at least in absolute terms.

When looking at digital adventurers’ emotional engagement with their banks compared to their favorite brands, an interesting twist emerges. Although digital adventurers are the most emotionally engaged banking consumers in absolute terms, the gap between engagement with their favorite brands and primary bank is higher for four of the six parameters (figure 6). Banks have some road to travel, if their most satisfied, seemingly more engaged consumers are not as “wowed” by banking services as they are with their favorite brands. 15 This is where we ask ourselves, “Are banking consumer relationships truly sticky? If these favorite brands become financial services providers, then what?”

We also analyzed how the segments we described above are distributed across the 17 countries included in our study (figure 7).

Predictably, when looking at clustering by country, 75 percent of respondents in Japan, a digital banking laggard, are traditionalists. Next in line are France, the United States, and Indonesia, with 41 percent, 38 percent, and 35 percent of their samples, respectively, falling into the traditionalist category. The decades-old and resilient branch infrastructure could potentially explain high composition of traditionalists in developed economies. However, the case of a developing country like Indonesia featuring a higher composition of traditionalists compared to the global average merits additional analysis.

The Netherlands boasted the highest composition of online embracers (63 percent), followed by China (58 percent), Switzerland (56 percent), Singapore (53 percent), and Norway (53 percent). High internet connectivity in most of these countries potentially explains their reliance on digital. For instance, the Netherlands ranked among the top four countries in the 2017 Digital Economy and Society Index (DESI), which measures digital performance and competitiveness in Europe. 16

Of the 17 countries studied, Brazil has the highest representation of digital adventurers compared to the global average. Meanwhile, the United Kingdom and India, comprising 46 percent and 42 percent of digital adventurers in their samples, respectively, mirror the global story more closely with higher satisfaction and high digital use. We will explore the country differences and drivers of respondents’ digital behavior in subsequent publications and an interactive feature.

Digital channels can provide an effective gateway to emotionally connect an organization to its consumers. Technology companies that are consumers’ favorite brands not only have best-in-class digital capabilities; they also do a superior job integrating digital and physical environments and integrating both strategically to foster an emotional connection. 17 Amazon’s digital prowess allows customers to discover, research, and buy products in minutes, while enabling its physical supply chain to deliver the goods most efficiently. Merging the physical with the virtual/digital is key to superior customer experience: putting the “real in digital and digital in real.”

According to our survey, consumers are more likely to increase use of digital channels (both online and mobile) if banks increase security, provide more real-time problem resolution, and allow for more regular banking transactions to be handled digitally (figure 8). On the other side, adding digital self-service screens at brick-and-mortar locations, or being able to connect with a bank representative virtually will increase consumers’ likelihood to use branches (figure 9). Putting the real in digital and the digital in real is clearly a route that banks must take in their digital transformation efforts. Following are some suggestions:

Bolster security measures for all consumers. With all three segments, stronger digital security will likely increase the likelihood that customers will use digital channels in the future. Security concerns are especially acute for traditionalists; in fact, this is why some traditionalists have never used online or mobile banking to access their primary banks.

Bolstering security using tools such as biometrics is paramount. These are already being widely used. For example, ANZ bank customers can make payments of more than US$1,000 via mobile app using Voice ID technology and no additional authentication. 18 Banks should advertise such security features more prominently and differentiate messaging for different segments.

Emphasize the convenience of digital with traditionalists. A big reason many traditionalists do not use digital channels is that they simply do not see their merit. Therefore, raising awareness around the convenience of banking on-the-go (mobile) or banking from anywhere (online) is pivotal. Consider boomers and seniors who may be hesitant to use digital channels. In 2016, Capital One bank in the United States partnered with Older Adults Technology Services (OATS), a nonprofit, and Grovo, a digital learning platform, to develop a training program, “Ready, Set, and Bank.” 19 The program consists of short online videos and live classes to educate seniors on the basics of online banking, such as setting account alerts.

As banks add more digital features in branches (digital in real), branch professionals should step up a campaign to demonstrate to these consumers how easy it is to use a digital screen or a tablet for simple transactions, including paying bills, transferring money, or even applying for a debit card. (More than 50 percent of traditionalists reported not owning one!) Once traditionalists become more comfortable with using branch-based digital tools, representatives should then familiarize them with mobile banking. Helping them download the bank’s mobile app should be easy to do, considering 92 percent of traditionalists already own a smartphone.

Expand mobile apps’ capabilities to simplify its user interface to engage online embracers. Last year, we predicted that mobile devices would replace branches as the central channel around which other channels revolve. 20 Now, online embracers are much more comfortable with online banking than they are using mobile banking apps. Banks should seek to encourage this segment’s engagement on mobile apps.

Among other reasons, a factor limiting embracers’ mobile banking usage could be the app’s limited functionalities compared to online banking portals. To increase online embracers’ willingness to use mobile banking, banks should focus on making mobile apps more intuitive and more comprehensive. Here, a good example is the iPhone®. For more than a decade, each iPhone® iteration has achieved massive market share by providing an intuitive and elegant user experience, coupled with comprehensive functionalities. 21 In addition, while some banks may fear cannibalization, cross-promoting mobile apps on online portals could help create a richer, more versatile consumer experience.

Transform mobile as an experiential channel for digital adventurers. Digital adventurers are already avid users of banks’ digital channels. They expect more from their primary banks, which can be seen in the gap in emotional connection between their favorite brands and primary bank. With this segment, banks should use mobile as a differentiator to build sticky experiences. Though digital adventurers choose mobile apps as much as online websites for bank interactions, they primarily use mobile for transactional services, such as paying bills or checking balances, and basic product applications.

Here, banks could position chatbots as the go-to help tool or letting consumers directly connect to a bank representative in the mobile app. These are good starting points, as this segment expects more real-time problem resolution in digital banking channels. In fact, enthusiasm among adventurers could be dampened by apps that lack customer service avenues. 22

Consider the launch of digital-only banks. JPMorgan Chase rolled out a mobile-only bank, Finn, which targets millennials. 23 Marketed as an independent brand, Finn lets consumers make deposits, transfer payments using the Zelle payment system, and activate a Finn debit card using the app. It provides multiple features to help consumers manage their money in a simple and convenient way. For example, its “Pocket Your Pennies” feature transfers any change left from consumers’ checking account purchases to their savings accounts. 24 Further, the rule-based “Autosave” feature gives a new dimension to banks’ traditional recurring deposit service. A consumer hoping to fund a weekend trip with friends can create a rule to save US$5 for every US$30 spent until the savings reach US$1,000.

Moreover, banks can encourage digital adventurers to step up their use of digital channels by simply providing smarter account opening features. Options such as prepopulating forms on websites and apps, making authentication easier, and allowing e-signatures or fingerprint scanning will likely simplify and enrich consumers’ product buying experiences.

Lastly, break the channel silos. Branch, ATMs, online, mobile, and call centers all need to be connected, along with third-party digital assistants such as Google Home and Amazon Alexa. Consumers’ fascination for omnichannel experiences is real. Seventy percent of consumers in our study consider a consistent experience across channels to be extremely important or very important in selecting their primary bank. Therefore, banks must have a seamless flow of data across all channels. Having a 360-degree view of consumer interactions across channels, products, and systems will pay off by building stickier emotional engagement.

Of course, these are broad recommendations and as such, they will not uniformly fit the different consumer banking systems, experiences, and cultures of every country.

However, despite these differences and nuances across geographies, we noticed a common, key theme: There needs to be an evolution in how consumers interact with their banks, and customers are expecting that progression to begin now. Picture these scenarios: Consumers hanging out at or working from café-resembling bank branches, interacting with their bank’s mobile apps as integrally and joyfully as they do with social media apps, or reporting lost/stolen card using the bank’s app instead of dialing the call center. These are not mere possibilities of distant future; they are the kinds of experiences many customers already expect—and have come to know—from the brands they most trust.

As the progression unfolds, human interactions will likely remain important, especially for milestone decisions in consumers’ financial journeys. However, digital will be at the heart of personalizing consumers’ day-to-day interactions to enhance their emotional connection to bank brands. And in many countries, mobile will likely become the epicenter of banks’ digital transformation strategies.

Further, branches, ATMs, online banking portals, and mobile apps will likely take different avatars in the coming years, infusing more real life in digital and more digital in real life. And as this happens, perhaps some channels could become more prominent than others. For instance, if mobile apps evolve as the go-to help tool for consumers, this could minimize the need for call centers.

Perhaps the key takeaway we gleaned from the survey is that customer satisfaction is relative . In the end, to capture the hearts, minds, and wallets of customers, banks will need to accelerate their digital transformation and reconfigure each channel to serve every need customers have. Only this level of transformation is likely to strengthen banks’ emotional ties with consumers and earn them a top spot in the list of consumers’ favorite brands.

Digital banking research from Deloitte

Deloitte has produced thought leadership around multiple aspects of digital banking on a global basis. The following are the firm’s thought leadership initiatives in 2018:

• A digital banking leadership study. Deloitte developed a digital performance framework that measured 20 attributes of digital leadership. To do this, the study assessed leading practices and banks’ ability to harness digital to create value across the organization. For further information, contact Angus Ross ([email protected]). 
• EMEA digital banking maturity study . By querying both banks and consumers and conducting mystery shopping, Deloitte benchmarked the digital banking capabilities and functionality of banks in the EMEA region. The study focused on which services and functions are offered to customers across the spectrum of opening a new account, maintaining it, and closing it.
• MIT Sloan–Deloitte collaboration digital global survey . The survey was designed to uncover the challenges and opportunities associated with the use of social and digital business and the practical issues facing organizations today.

Acknowledgments

Richa Wadhwani

Assistant manager, banking and capital markets

Deloitte Center for Financial Services

Deloitte Support Services India Pvt. Ltd.

Aarushi Jain

Senior analyst, banking and capital markets

The authors would like to extend special thanks to Anish Kumar and Satish Nelanuthula of Deloitte Support Services India Pvt. Ltd. for their contributions toward the advanced survey analysis in this research project.

The Center wishes to thank the following Deloitte professionals for their support and contribution to the report: Michelle Chodosh , marketing senior manager, Deloitte Center for Financial Services, Deloitte Services LP; Patricia Danielecki , senior manager, chief of staff, Deloitte Center for Financial Services, Deloitte Services LP; Erin Loucks , manager, Deloitte Center for Financial Services, Deloitte Services LP; Limor Mazlin , senior consultant, Deloitte Consulting LLP; Stephanie Posner , senior manager, Deloitte Touche Tohmatsu Limited; Ayrton Rodriguez , consultant, Deloitte Consulting LLP; and Julius Tapper , senior consultant, Deloitte Consulting LLP.

Cover image:  Heidi Schmidt

Daniel Mayo, "Banking ICT spending predictor," Ovum , February 2, 2018.  View in article

Taylor Nicole Rogers, “Bank of America finally sees mobile deposits surpass in-person transactions,” The Street , July 16, 2018 . View in article

Ibid. View in article

The sample was cleaned to take rogue responses out of consideration. For our cluster analysis, we studied 13,912 respondents (with cleaned data) for their channel usage behavior and how it relates to emotional engagement. View in article

Val Srinivas, Steve Fromhart, and Urval Goradia, First impressions count: Improving the account opening process for millennials and digital banking customers , Deloitte University Press, September 6, 2017.  View in article

Rob Danna, “How emotional connections build champions for your brand,” Forbes , December 22, 2017. View in article

Scott Magids, Alan Zorfas, and Daniel Leemon, “ The new science of consumer emotions ,” Harvard Business Review , November 1, 2015. View in article

eMarketer , "Digital payments struggle to catch on with consumers in Japan," October 14, 2016.  View in article

Li Hong, “ICT lifts China to become global trendsetter,” Global Times , April 12, 2018; Melissa Cheok, “For all its tech savvy, Singapore still prefers cash over digital payments,” Bloomberg , September 5, 2017. View in article

Peter Renton, “The new intersection of banks and marketplace lending,” Lend Academy , December 21, 2016. View in article

Srinivas, Fromhart, and Goradia, First impressions count .  View in article

Chris Skinner, “Big banks are not fleeing the fintech heat (yet),” The Finanser , accessed July 31, 2018. View in article

Shirra Frost, “Engage customers with financial alerts,” ABA Bank Marketing, March 8, 2017. View in article

For our cluster analysis, we included data for 13,912 respondents on channel usage behavior. View in article

A small portion of respondents indicated that their favorite brand is a bank. View in article

European Commission, “ The Digital Economy and Society Index (DESI) ,” accessed on September 19, 2018.  View in article

Greg Simpson, “The ambient customer experience: Physical, digital, virtual and everything in between,” CIO.com, November 22, 2016. View in article

Sara Baker, "Why voice biometrics will end the password era," Security Brief , July 9, 2018. View in article

Grace Noto, “Capital One joins effort to educate seniors about online banking,” Bank Innovation , August 5, 2016. View in article

Val Srinivas, 2018 Banking Outlook , Deloitte Center for Financial Services, 2017. View in article

Paul Brown and Diane On’Neill, “Apple iPhone: 10 years of UX innovation,” Strategy Analytics, December 11, 2017. View in article

Lisa Joyce, “What consumers love (and hate) about mobile banking apps,” The Financial Brand , April 24, 2018. View in article

Adam Shell, “Chase all-mobile bank, Finn, rolled out nationwide in search of millennials,” USA Today , June 28, 2018. View in article

Frank Chaparro, “JPMorgan Chase launched an online bank for millennials called Finn, and I prefer it to the real thing,” Business Insider , July 8, 2018. View in article

Topics in this article

The Deloitte Center for Financial Services provides timely insights on the most pressing issues facing the industry, helping keep your organization a step ahead.

Val Srinivas

• Banking and securities research lead
• Deloitte Services LP
• [email protected]
• +1 212 436 3384

Senior research leader, banking & capital markets

Val Srinivas is the banking and capital markets research leader at the Deloitte Center for Financial Services. He leads the development of our thought leadership initiatives in the industry, coordinating our various research efforts and helping to differentiate Deloitte in the marketplace. He has more than 20 years of experience in research and marketing strategy.

Managing Director | Deloitte Consulting LLP

Angus Ross is part of Deloitte Consulting LLP’s Digital Transformation leadership team, where he is responsible for orchestrating our end-to-end digital strategy, transformation, and innovation offerings. He is a passionate and revolutionary transformation executive with 22 years of experience leading large-scale change across financial services, telecommunications, and technology industries. Ross effectively bridges strategy, execution, and innovation, and brings a unique blend of consulting, industry, and startup experience to the practice. Angus has a deep understanding of banking imperatives, technology enablers, and cultural change, as well as a track record of transforming banks by increasing customer relevance (personalization), reducing structural costs (lean operations), and increasing business agility.

• [email protected]
• +1 212 436 3792

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Building a digital-banking business

The digital revolution in banking has only just begun. Today we are in phase one, where most traditional banks offer their customers high-quality web and mobile sites/apps. An alternate approach is one where digital becomes not merely an additional feature but a fully integrated mobile experience in which customers use their smartphones or tablets to do everything from opening a new account and making payments to resolving credit-card billing disputes, all without ever setting foot in a physical branch.

More and more consumers around the globe are demanding this. Among the people we surveyed in developed Asian markets, more than 80 percent said they would be willing to shift some of their holdings to a bank that offered a compelling digital-only proposition. For consumers in emerging Asian markets, the number was more than 50 percent. Many types of accounts are in play, with respondents indicating potential shifts of 35 to 45 percent of savings-account deposits, 40 to 50 percent of credit-card balances, and 40 to 45 percent of investment balances, such as those held in mutual funds. 1 1. “ Digital Banking in Asia: What do consumers really want? ” (PDF–690KB), March 2015. In the most progressive geographies and customer segments, such as the United Kingdom and Western Europe, there is a potential for 40 percent or more of new deposits to come from digital sales by 2018. 2 2. “ Strategic choices for banks in the digital age ,” January 2015.

Many financial-technology players are already taking advantage of these opportunities, offering simplified banking services at lower costs or with less hassle or paperwork. Some upstarts are providing entirely new services, such as the US start-up Digit, which allows customers to find small amounts of money they can safely set aside as savings. 3 3. “ The fight for the customer: McKinsey global banking annual review 2015 ,” September 2015.

A new model: Digital-only banking businesses

While it’s important for banks to digitize their existing businesses, creating a new digital-only banking business can meet an evolving set of customer expectations quickly and effectively. This is especially true in fast-growing emerging markets where customer needs often go unmet by current offerings. The functionality of digital offerings is limited, and consumers frequently highlight low customer service at branches as a key pain point.

So how should banks think about a digital-only offer?

Because banking is a highly regulated industry and a stronghold of conservative corporate culture, there are tremendous internal complexities that need to be addressed. These include the cannibalization risk to existing businesses and the need to foster a different, more agile culture to enable the incubation and growth of an in-house “start-up.” The good news is that our work shows it is feasible to build a new digital bank at substantially lower capex and lower opex per customer than for traditional banks (Exhibit 1). This is due not only to the absence of physical branches but also to simplified up-front product offerings and more streamlined processes, such as the use of vendor-hosted solutions and selective IT investment, that reduce the need for expensive legacy systems.

Six success factors to build digital-banking businesses

Based on our experience helping more than 20 institutions evaluate, design, and build new digital-banking businesses, we have identified six critical success factors that banks will need to address to ensure a quick and successful launch.

1. Focus on where the real value is

Launching a successful new business requires complete clarity about what its value drivers are. While this might seem like an obvious point, we find it is often overlooked. Instead, there is a temptation to copy or replicate existing models. For instance, mBank, Poland’s first digital bank, has succeeded by offering consumers access to unsecured personal loans and other simple products. It’s a model that works in countries like Poland and the Czech Republic, where credit cards aren’t popular, but may not be successful in some other markets.

Banks also tend to take the view that one solution can work for an entire region. Unfortunately, this approach misses significant value opportunities. A granular, country-by-country analysis of revenue per retail banking customer, for example, reveals significant differences in product opportunities (Exhibit 2). Breaking it down further by different customer segments or sub-segments highlights even starker differences that can inform a business strategy. Some 43 percent of banking customers in Taiwan, for instance, are open to digital-investment options versus just 17 percent in Australia.

Another critical element that varies by country is the state of regulation (for example, the requirements for paper-based documents and forms) and the associated infrastructure (such as the availability of a universal national ID). China, for instance, has become a leading innovator in digital banking in part because of a favorable regulatory environment.

2. Constantly test to refine the customer experience

Launching a successful new digital-banking business requires a marriage of traditional consumer research and a deep, real-time understanding of the behavior and pain points of individual customers. This means a constant and rapid stream of prototypes starting with the Minimum Viable Product (MVP) and subsequent iterations in order to figure out what will make the customer experience superior across all touchpoints. This sort of “real life” testing is critical for identifying what customers actually value as opposed to what they might say they value. It also yields up to 70 percent fewer defects and errors. 4 4. Numetrics industry software database.

One company, for instance, approached the creation of a digital-banking business targeted at emerging-markets millennials with a hypothesis that it would be critical to allow customers to sign in with their social-media accounts. Deeper interviews with customers and many versions of the prototype (100 to 150 screens for structured consumer research and feedback loops) revealed this was not true. On the contrary, urban and educated millennials have significant security and privacy concerns about any link between their finances and social networks. So instead of the social media sign-in, the team embedded visual security cues into the customer-onboarding process.

3. Organize for creativity, flexibility, and speed

Building a business using a constantly iterative approach requires a way of working that banks typically aren’t used to. There are three areas where a different way of operating needs to be nurtured.

• Cross-team collaboration. The core group building the digital bank should have a solid understanding of not just the new technology architecture, but also of the bank’s design and brand and the economics of its business model. This includes full-time members, as well as temporary talent in critical areas, such as compliance. From here, the team can gradually scale up to include more staff from technology departments. Portugal-based digital bank Activobank, for example, started with a management team of six to eight people during the design of the digital business model and then scaled up to more than 30 during implementation (excluding line/operational roles).
• A ‘garage like’ working environment. While an actual garage isn’t necessary, a physical space that provides a nurturing environment for creative thinking and prototyping is. This means open spaces, plenty of whiteboards and worktables where people can congregate and work together, as well as habits that foster innovation, such as so-called sprints. In a sprint, all the individuals involved in the development of a digital bank—developers, IT-security, compliance, risk-assessment, and marketing staff who understand the needs of the customer—get together in one room for several live brainstorming sessions. Instead of the lengthy back and forth that normally happens between departments, this allows for quick and efficient decisions about the technical specifications of the product. This process can truly deliver acceleration to working results. Sprints—from whiteboard to working version of the product—can happen in as little as four weeks. On average, companies see a 27 percent higher development productivity. 5 5. Numetrics industry software database. For example, Orange Bank took approximately eight months from strategy to launch of version 1.0 of its digital offering, prioritizing time to market and limiting changes required to their core banking system. Additionally, they were able to quickly scale up, acquiring up to 800,000 customers in the first eight months of operations. One critical requirement and advantage of this approach for banks is the way it allows compliance and risk-assessment staff to get in the room early and take on the roles of enablers and problem solvers, instead of gatekeepers who are often looped in only after plans are well under way or even completed.

A central ‘control tower’ team. Launching a digital bank is a juggling act, with multiple miniprojects running at the same time, such as a new credit card, decisions about hiring, development of the organizational structure, and the creation of a brand. It is the job of the control-tower team to make sure all these projects are coordinated by moving resources to necessary teams quickly or prioritizing initiatives so that timeline targets can be met. The team must work to identify bottlenecks—such as vendors who don’t respond rapidly enough to requests or IT not having enough storage capacity for data—and then either quickly resolve them or refer the problems upward to the CEO or the board.

The members of this team should be exceptional project managers with experience running large-scale projects, a high comfort level with agile development and sprints, a good working knowledge of the big picture, and a clear understanding of relevant regulatory issues.

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4. create an ecosystem of partnerships.

Successfully launching a new digital-banking business requires quickly acquiring a critical mass of customers. Two industries with large amounts of digital customers who can help the process are e-commerce marketplaces and telecommunications. E-commerce players can be useful partners because they present an opportunity for banks to create lending services for the site’s existing customers, both consumers and small and medium-size merchants. There’s a clear benefit for the e-commerce player, too, since easy access to financing on an e-commerce site is an enticement for working-capital-constrained, rapidly growing small businesses to keep selling on that site. Likewise, if consumers know there is financing available, decisions to buy large-ticket items such as refrigerators or TVs become much easier.

The success of Alibaba’s Ant Financial in China, which serves small businesses and has grown into a $20 billion business in two years, illustrates the value of a bank/e-commerce union. Offering simple ways to get loans, Ant Financial has rapidly become one of the biggest lenders to small businesses in China. Although now owned by Alibaba, it originally started as a partnership with CCB and ICBC in 2007.

5. Build a two-speed IT operating model

To implement the test-and-learn approach and short release cycles that are so critical for launching and operating a competitive digital bank, two different yet integrated IT systems are needed: the traditional, slower, secure and stable, transaction-focused legacy back end and a rapid, flexible, customer-centric front end.

The customer front end should be designed by small, nimble product teams (usually fewer than ten people) using an agile, sprint-based development approach. Software release cycles for these customer-facing elements should be modular and designed for quick deployment, prioritizing a minimum viable solution that will evolve over time.

To reduce the time needed to build the two-pronged system, a combination of customized and out-of-the-box functionalities can be used. One new digital player combined existing functionalities from their front-end provider, such as peer-to-peer payments, with new features that consumers care about but to which they don’t have a lot of access, such as personal-finance modules where they can track their expenses and set savings goals.

To the extent that the existing IT architecture and regulatory framework allow, a variable-cost model should be considered, such as cloud-based system or data-storage solutions. A number of solution providers are expanding into emerging markets to offer competitive alternatives to traditional high-capex investments in data centers. Adopting a cloud-based solution allows a new digital player to scale up its cost structure along with revenues, thus achieving a faster breakeven point. It also adds further flexibility, especially if the architecture is designed with open APIs to enable collaboration with potential financial-technology partners who already operate from a cloud-based environment.

6. Get creative with marketing

Since digital-only banks don’t have the same customer-acquisition opportunities as legacy banks with branch networks, marketing is a major cost, representing 25 to 35 percent of total operating expenses. This is true even for legacy banks that create digital start-ups, since the new entities must clearly differentiate their brand and value proposition from the parent operations’ if they want to be successful. Digital-only banks will likely be targeting a younger, more digitally savvy customer than incumbent banks. AirBank, for instance, which launched in the Czech Republic without the backing of an existing bank, tagged itself as the “first bank you will like” and promised that all customer communications would be jargon-free and all fees clearly outlined in one simple document.

To communicate such distinct selling points cost-effectively, banks must cultivate word-of-mouth recommendations and feedback through social media. This entails going after customers in a much more targeted way than banks are used to, both with an understanding of how to maximize value according to geographic distinctions (focusing on Twitter in Jakarta and WeChat in China, for instance) and specific customer niches (for example, buying ads on Facebook for millennials who play golf).

One particularly creative marketing example is a promotion that China’s successful messaging app Tencent’s WeChat ran during the Chinese New Year holiday in 2014. To promote its WeChat Payment service, which allows peer-to-peer transfer and electronic bill payment, the company launched an app that allows users to send a specific amount of money to a certain number of friends, with the app randomly assigning the money. To redeem and see how much money you were sent, recipients had to sign up for a WeChat account. WeChat’s virtual envelopes went viral because they added an element of suspense to the tradition of giving gifts of money in red envelopes during the New Year. In two days, the company got 200 million of its existing and new users to link their bank cards to their account, a feat that took Alibaba’s Alipay eight years.

Launching a new digital-banking business enables banks to rapidly drive value creation. A combination of leveraging smart technology solutions and incorporating the critical success factors outlined above can help banks do this in an accelerated manner.

Sonia Barquin is a consultant in McKinsey’s Kuala Lumpur office, and Vinayak HV is a principal in the Singapore office.

The authors would like to acknowledge the contributions of Somesh Khanna, a director in the New York office and a global leader of McKinsey Digital.

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