Updated: May 13
We enjoyed the recent report by N26 in partnership with Accenture on customer views on digital-banking. Perhaps surprising to some may be that the main reasons to not move from a traditional bank to a digital bank is lack of familiarity with the digital product, or general satisfaction with one’s current bank. This bodes well for the digital banks of the world, as trust does not seem to be a significant barrier. Digital banks and FinTechs alike must continue to make strong communications and marketing efforts to educate consumers about their services.
The report also reveals that despite undeniable adoption across markets, certain countries are leading the charge when it comes to digital-first banking. Saudi Arabia (54%), United Arab Emirates (51%), Brazil (44%) and China (43%) have the highest share of customers in their financial services markets already having a digital-only bank account. However, many countries which have smaller digital banking populations are swiftly catching up. Some, including Switzerland, Ireland, the UK, and France, increased their digital banking growth rate by more than 50% between 2018 and 2020.
The potential for digital banking varies significantly from country to country, depending on a variety of factors. In addition to openness to digital banking, a critical factor is obviously the size of the population. The research shows that China has the largest absolute number of digital bank customers: approximately 392 million in 2020. Its growth rate is lower than those of other leading markets (23% in mainland China), but because of its large population it has added more customers than all the other 27 markets combined.
Other countries ranking among those with the greatest potential for large-scale digital banking adoption are the US, Brazil, and Japan—each having more than 40 million customers in 2020 and showing positive growth trajectories. The research estimates the potential US market share comprises 148 million digital-only banking customers.
Western European countries are catching up quickly, despite their relatively low levels of adoption. Between 2018 and 2020, the number of digital-only banking customers in France increased by 55%, in Spain by 44%, in Germany by 35%, in Belgium by 30%, in Italy by 28%, and in the Netherlands by 20%. Although 35% of financial services customers in Europe say the typical digital features would not be sufficient to motivate them to open a digital-only bank account, the remaining 65% could potentially be converted by a compelling value proposition—which, according to the consumers surveyed, includes a simple design and user experience, good value for money, and clear and simple communication.
The report also reveals that in Brazil, over 78% of digital-only bank customers stating they trust digital banks with their data. The second most trusting country is the US, at 68%, and the least trusting are both in Europe, France and Spain at 53%. Nubank, the biggest digital bank of South America with over 45 million customers across Brazil, Mexico and Colombia, has surely had a positive influence on this extent of trust.
This paints a pretty picture of the Brazilian neobank market, which could explain why companies like N26 are now focusing their energy on integrating the Brazilian market.