In five years’ time, consumers will combine their banking needs with a trip to their local café or supermarket, opening an account secured with full KYC and AML checks through super-capable POS terminals or withdrawing cash when paying for their coffee. As Brett King puts it in Bank 3.0, ‘Banking is no longer somewhere you go, but something you do.’ – a complete change from what we’ve known to date. And this revolution will be powered by super-capable, automated banking terminals, backed up with secure, efficient and powerful software. This new approach to banking service delivery will have wide-reaching effects, including enabling those people around the world without sufficient access to financial services to enter the banking system, a market valued at around US$380 billion per year.
To succeed, banks need to completely change the way they think about their existing systems. As the world moves online, customers will expect faster, cheaper, more secure and flexible services as and where they want them.
Digital banking has been enabled by the rapid development of cloud computing and intelligent terminal technology – which itself has proliferated thanks to the wide-spread adoption of super-fast 4G and 5G mobile Internet. Although there are different trends in the development and adoption of digital wallets globally, the global move is undeniable: digital wallets are the future of payments, as source data for their adoption and usage shows.
The development of digital banking is closely related to the development of the mobile wallet market, since mobile wallets are the entrance point for digital banks to reach users, and an important interface for the provision of a wider range of consumer financial services. The move from mobile wallets to fully digital banking is going to have wide-reaching effects, including enabling those without sufficient access to financial services to enter the banking system, a market which Accenture estimates to be worth around US$380 billion per year.
The move from mobile wallets to fully digital banking is going to have wide-reaching effects, including enabling those without sufficient access to financial services to enter the banking system. Banks are going to have to completely change the way they think about their existing systems. Not only is there a wealth of new opportunities available: as the world moves increasingly online, customer expectations for speed and flexibility in bank service delivery are growing all the time.
Now is the right time for banks to catch up and offer customers a superior experience. A number of consulting firms have published widely-appreciated studies to the effect that most Western banks are simply not ready as yet to take advantage of the opportunities offered by true digital banking. For instance, CapGemini and EFMA’s World FinTech Report 2020 notes that traditional banks can still thrive in today’s market by embracing a fully-digital open platform model.
The impact of COVID-19 on the global economy is serious and far-reaching. The factors which we have referred to as drivers towards digital banking have, if anything, intensified since the start of the crisis. As the initial impact of the virus recedes, the world now faces a huge economic downturn. GDP in the United States alone is projected to have fallen by more than half in Q2 2020, according to the Atlanta Federal Reserve in June 2020.
Qurate Business Intelligence is just one of many research organisations to predict that the market for digital banking will double in the next five years from $3.3 billion to $7.2 billion, for a compound growth rate of 10.47%. The factors surrounding this growth rate include the impact of COVID-19 on payments, the growing use of blockchain solutions and digital currencies in financial services, and above all consumer demand for faster and cheaper banking products that can be delivered where and when consumers need them.