‘Digital Lifestyle Bankers’ to capture 30-50% of retail banking by 2025

2026-08-08 04:24:27 Business

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The retail banking landscape will be transformed in a number of ways, from the way service providers used to position their offerings, and its new features and applications, to the type of providers themselves. Digital Lifestyle Bankers, a new breed of players, will flourish; some resulting from collaborations and partnerships among existing players, and some from greenfield players with highly transformative technologies, according to a new report from ResearchICA, Washington DC based Business Research and Consulting Group.

The Report predicts that mobile payment and banking, social banking, social lending, P2P lending, virtual market places and others in the areas of mobile money, already present in the market, will only get bigger, smarter, and stronger in the coming years. In fact, evolution of technologies such as blockchain, and the introduction of new regulatory frameworks such as PSD2 will change the rules of the game, increasing the dynamism of the industry and the opportunities for ?Digital Lifestyle Bankers?.

Report finds that ?Digital Lifestyle Bankers? are making big impact on banking industry and forcing a drastic change in the value chain. This impact is now clearly visible on traditional banking system. For example, 1,614 bank branches closed in the US in 2016; 600 bank branches closed in the UK in 2016; commercial bank branches declined by 26% in the US during 2005 ? 2015, and 61% since 1994. Similar trend is prevalent across the globe ? traditional banking model is stagnating and digital banking is gaining momentum.

What is causing such a drastic change in the firmly established banking system? The Report found that consumers in a digital world (100% mobile penetration globally) are more empowered than they were a decade ago. The digital consumers no longer rely solely on traditional channels and expect to be always-connected with companies and want to interact with them exactly when they need. And, Banking is no exception to them. Human interaction in banking, payment and commerce will decline by up to 60% worldwide in the next 10 years mainly impacted by technologies such as robotics, blockchain, artificial intelligence, big data and virtual reality.

?In the next 5-10 years, competitive reach in banking and financial space will no longer be determined by physical presence or availability of distribution channel. It will largely depend upon mobile money licenses, selection of right technology for the market and ample marketing budgets,? said David Brown, Senior Consultant, BFSI, ResearchICA.

?In the coming years, when every aspect of banking, commerce, payment and retail activity can be done digitally, target market and competitive arena will no longer be defined by physical footprint, but rather by its technology, its regulatory boundaries and the sheer limitations of its marketing budget,? added Mr. Brown.

The Report cites digibank as an example of one such hypergrowth business. DBS bank of Singapore launched ?digital bank account? branchless banking services in India. The bank allows users to complete the KYC process online to open a normal bank account. DBS offers debit card and a mobile application to its users for doing all types of online transactions. Users can deposit, save, and make payment. The bank also offers 7% interest on the balance in the account more than the average interest of 4% being offered by other banks in India.

The above example clearly shows that even regional banks could possibly become national players or even explore overseas markets without any brick-and-mortar footprint. The situation is ideal for right conglomeration. Mobile money players having right technology can partner with banks or vice versa to compete on a new, larger field. This will help new players to expand into new markets rapidly. However, this digital disruption can potentially breed multiple new competitors and can result in market fragmentation in the short term. The Report predicts that there will be increased competition from non-bank players like PayU and Alipay. Therefore, marketing and branding is going to play a very crucial role and banks can leverage their long history and brand reputation.

Diamond bank of Nigeria realised the situation early and was able to grow its customer base by 50 percent (6 million) in two years, not by opening additional branches but through its modern mobile banking strategy. More interestingly, it took 23 years and 300 branches to Diamond bank to get its first 6 million customers.

Oscar Mine, Senior Analyst, Mobile Money Business Intelligence, pointed out, ?banks that are still working on old models need to be worried about their future. They must think about the ways by which they can serve the consumers of tomorrow.?

As digital technologies offer level playing field to small non-traditional players in the banking industry, banks are forced to invest in modern systems. Failing to do so, banks risk disconnected to even their loyal customers and losing market share to more agile ?Digital Lifestyle Bankers?. These modern players ? FinTechs, digital mobile operators, or their conglomerations ? would be delivering a customer experience that will be more aligned to the expectations of digital consumers of the future.

ResearchICA?s Thought Provokers:

1. As technology ensures level playing field for all the players in Retail banking, what are the strategic option banks can choose from?
2. How ?Digital Lifestyle Bankers? are outperforming competition within the industry?
3. What conglomeration of banks, FinTechs, and mobile operators can bring on the table?
4. What are the factors that will determine whether MNOs should collaborate or go-solo?
5. What is the best course of action for traditional banking players?
6. What are the upcoming challenges for ?Digital Lifestyle Bankers??

The answer to these questions and many noteworthy cases of modern mobile money (banking payment, retail, and commerce) built upon hypergrowth models with the revenue earning opportunities in both developed and emerging markets have been analysed in the Report ? Worldwide Mobile Money Modernisation and Monetisation 2017 - 2022.

For more information please visit:

http://www.researchica.com/research/modern-mobile-money-2018