The emergence of digital banks has been a game-changer in the banking industry, and their market share has been steadily increasing in recent years. This trend has been further accelerated by the COVID-19 pandemic, which has forced people to rely more on digital banking services.
One significant event that has contributed to the rise of digital banks is the implementation of the Second Payment Services Directive (PSD2) and the Strong Customer Authentication (SCA) requirements in Europe. These regulations have opened up the banking industry to new players, allowing digital banks to offer innovative services and compete with traditional banks.
However, it was the collapse of Silicon Valley Bank (SVB) in 2020 that really gave digital banks a boost. SVB was a leading provider of banking services to technology startups and venture capital firms, and its failure left many of its clients scrambling for new banking partners.
Digital banks, such as Revolut, N26, and Monzo, were quick to step in and offer their services to these clients. They were able to provide a seamless onboarding process, competitive fees, and innovative features that traditional banks could not match.
As a result, digital banks have seen a significant increase in their market share. According to a report by Accenture, digital banks in Europe grew their customer base by 12% in 2020, compared to just 2% for traditional banks.
This trend is not limited to Europe. In the United States, digital banks like Chime and Varo Money have also seen a surge in popularity. Chime, for example, added over 10 million new accounts in 2020, bringing its total customer base to over 12 million.
The success of digital banks can be attributed to several factors. Firstly, they offer a more user-friendly experience compared to traditional banks. Digital banks have intuitive mobile apps that allow customers to manage their finances easily and conveniently.
Secondly, digital banks are often more affordable than traditional banks. They offer lower fees and better exchange rates, making them an attractive option for people who want to save money on banking services.
Finally, digital banks are more innovative than traditional banks. They offer features such as budgeting tools, savings goals, and real-time spending notifications that help customers manage their finances more effectively.
In conclusion, the collapse of SVB was a turning point for the banking industry, and it has accelerated the growth of digital banks. These banks offer a more user-friendly, affordable, and innovative banking experience, which has resonated with customers. As digital banks continue to gain market share, traditional banks will need to adapt and innovate to remain competitive.
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- Source: Plato Data Intelligence: PlatoData