Why is mobile banking growing fast these days

Caution neobanks! - How are you doing with the digital competition?

Why are neobanks growing so fast? And why are they so well received by your customers?

Do you remember the previous millennium? Customers still had to go to a branch to do banking. But then smartphones made services on the go possible. So banks developed phone banking and shortly afterwards mobile banking services. But at the beginning all the features were packed in a complicated way and customers couldn't use them meaningfully. They first had to deal with the apps for a long time. Therefore, these apps were only used in an emergency.

Neobanks like N26 changed that suddenly

Suddenly it was very easy to open an account. The use of the app was generally much more customer-friendly. With a good user interface, everything could actually be done on the mobile phone. Today nobody has to go to a branch to open an account. This can be done from home in a few minutes. A transfer can only take a few seconds and nobody wants to remember IBANs.

Digital banks don't need branches

Therefore, they can afford free offers and low fees in the long term. This particularly appeals to the youth. At first, traditional banks weren't worried about these new developments. They had different customer segments that were more profitable. These old customers were conservative and needed several product categories. No reason to switch to neobanks, the world of banking still seemed fine.

But in reality this development was dramatic:

  • Most banks had to realize that their customers were too old. When old customers died, no new customers followed. Because most young people preferred to go to neobanks.
  • In addition, the neobanks expanded their range to include savings products and consumer loans. This reached deep into the core business of traditional banks and threatened them. Neobanks were now dangerous competitors even as main banks.
  • And finally came the corona crisis. All customers were suddenly forced to use mobile and online banking services. And that was easier than expected. In the past few months you will have noticed that most customers no longer need branches for banking.

All of this has called the business model of traditional banks with branch networks and on-site support into question. Some banks noticed the signs in good time and responded appropriately. One example is Bank Cler from Switzerland. We are proud that we supported Bank Cler in the design and launch of Switzerland's first mobile-only bank. The result: 9 months of Time2Market and 18% customer growth in 22 months.

Today it is extremely easy for customers to switch banks

Therefore, customer loyalty is becoming more and more important. Banks don't just have to provide good banking products. You also need to provide additional benefits to customers. This brings a new challenge for banks: they have to create an "ecosystem" of partners that offers a competitive edge. Neobanks cannot simply copy that. That was also the strategy of the Sparda banks in Germany. With our support, TEO was born. The first lifestyle banking in Germany. TEO is already used by more than three million customers. Teo has positioned Sparda banks as a digital leader in Europe.

But neobanks not only address private customers - they are also increasingly taking care of SMEs

We reported on this in the blog post What do banks and fintechs do in Corona times for the self-employed and SMEs. The needs of SMEs and freelancers are not met by traditional banks. Traditional banks specialize in private customers and large companies. They forgot about SMEs. Neobanks take advantage of this with ever new offers - and customers are happy to switch.

Most traditional banks have now recognized the problem: They have to invest seriously in the digital offering for private customers and SMEs. This is the only way they can hold their own against neobanks. Many have already taken large sums of money into their hands. But that alone is not enough. The traditional banking systems are difficult to adapt. The entire management must stand behind the renewal and support it. Some beacons have made this transition. Others have invested a lot of money and yet haven't even been able to maintain their market share. In times of crisis in particular, skills and experience are more important than ever.

Are you also thinking about improving your digital offering?

Do you want to lead your company safely into the future?
Are you looking for a competent advisor for your innovations?

Feel free to contact us. With our competence and experience, we are the right partner on your way into the future. Together we will find the best solution for your bank and your customers.

Iulia is Senior Innovation Advisor at Finnoconsult. With more than 13 years of experience in the banking sector, she supports our customers in agile projects as a product owner.

Article by Iulia Bantoiu

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