In recent years, digital banks have gained traction with millions of consumers worldwide. As a mobile bank, N26 is deeply invested in understanding the current state of the industry, especially in the wake of the COVID-19 pandemic. We teamed up with Accenture to gain a better understanding of consumers’ attitudes towards digital banking. Our analysis is based on their 2020 Global Banking Consumer Study, which surveyed 47,000+ customers of digital-only and/or traditional banks in 28 markets.
Following a global demand for simpler, more intuitive services, the banking industry is being digitally disrupted. New, innovative players in digital banking are gaining trust with consumers while incumbents accelerate their digital transformation, putting them in a stronger position to retain their customers. The growth and success of digital banks showcase the promise of this market. In just a few years, millions of customers have switched to digital banking for its ease and convenience—a trend accelerated by the COVID-19 pandemic.
Following the shifts in consumer expectations since the pandemic began, it's clear that digital banks now have even greater opportunities to expand their footprint by drawing diverse communities closer to the benefits of the world of fintech—especially women and low-income earners.
"It is clear that building and earning trust is a significant factor in our industry’s future, especially as we do not have centuries of legacy that traditional banks do. However, the pandemic showed that we must be focused on the future, not the past. That's why N26 is building banking for the 21st century and continues to earn the trust of millions of customers around the world", said Alex Weber, Chief Growth Officer of N26.
1 in 4 customers are already using a digital-only bank
Across the 28 countries surveyed, the number of consumers with a digital bank account represented 23% of the population—an estimated 450 million customers.
But estimates from our analysis reveal that the number of consumers with a digital bank account could grow to at least 70% in most of the regions. The desire to make bank branches a thing of the past is strong. Plus, nearly half of the consumers surveyed who don’t currently have a digital bank account say they would be motivated to open an account so they could access typical digital banking features. Together, these findings suggest there’s still a largely untapped market for digital banks—potentially as many as 1.4 billion customers across the 28 countries.
Drivers and barriers to digital-only banking
Drivers for digital-only banking
When it comes to digital banking, trust in the financial institution is key. We learned that the main drivers of digital bank adoption worldwide include the simple, convenient mobile app and website experience, clear and simple bank communications, and competitive pricing. These factors were also emphasized by customers who don’t currently bank digitally as incentives that might convince them to switch. These findings suggest that digital-only banks could gain loyal consumers by emphasizing these competitive advantages over traditional competitors.
The barriers that remain
Despite these drivers, there will likely continue to be a proportion of consumers who remain skeptical of digital banks. 28% of all consumers surveyed say none of the typical digital-only banking features would motivate them to open a digital only banking account. Some are simply happy with their current provider, while others are unfamiliar with the offerings of digital banks. Although 35% of the bankable population in Europe say typical digital banking features wouldn’t motivate them to open a digital-only bank account, 65% could still be converted to digital banks because of their clear value proposition.
Countries taking the lead in switching to digital-only banking
Despite undeniable adoption across markets, certain countries are leading the charge when it comes to digital-first banking. Saudi Arabia, United Arab Emirates, Brazil, and China boast the largest share of their respective populations already using a digital bank.
It’s also clear that Western European countries are catching up quickly. Between 2018 and 2020, customer acquisition accelerated in the countries with relatively low adoption rates: Spain, Germany, Belgium, Italy, and the Netherlands. Globally, the countries with the strongest growth in digital banking adoption between 2018 and 2020 were Switzerland, Brazil, Ireland, the UK, and France. Looking forward, China and the United States will likely see strong digital-only banking adoption. These markets could soon have a total of 771 million and 148 million digital bank customers, respectively.
| The Netherlands | 7 | 8.4 | 42.4 | 50.7 | 20% |
|---|---|---|---|---|---|
| Germany | 7.5 | 10.1 | 44.2 | 54.3 | 35% |
| Belgium | 9.6 | 12.5 | 43.5 | 56 | 30% |
| South Africa | 10 | 13.9 | 65.9 | 79.8 | 39% |
| Spain | 10.6 | 15.3 | 48.2 | 63.5 | 44% |
| Mexico | 14.5 | 18.5 | 62.5 | 81 | 28% |
| United States | 14.3 | 18.7 | 40.7 | 59.4 | 31% |
| Canada | 16 | 18.8 | 37.8 | 56.6 | 18% |
| France | 12.9 | 19.7 | 34.9 | 54.6 | 53% |
| Ireland | 14.9 | 23.2 | 51.2 | 74.4 | 56% |
| Italy | 20.5 | 26.1 | 45.6 | 71.7 | 28% |
| Russia | 27.6 | 32.2 | 48.5 | 80.7 | 17% |
| Japan | 36.4 | 41.2 | 37.4 | 78.6 | 13% |
| China (mainland) | 34.6 | 42.5 | 41.1 | 83.6 | 23% |
| China (Hong Kong) | 15.6 | 24.3 | 50.3 | 74.6 | 55% |
| Brazil | 25.4 | 44 | 43.4 | 87.4 | 73% |
| United Arab Emirates | 48.7 | 50.7 | 41.4 | 92.1 | 4% |
| Denmark | 11.4 | 14 | 38 | 52.1 | 23% |
| Finland | 5.8 | 7.4 | 51.1 | 58.4 | 27% |
| Norway | 11.1 | 15.7 | 45.5 | 61.2 | 41% |
| Sweden | 7.5 | 10.5 | 40.6 | 51.1 | 40% |
| Switzerland | 7.7 | 14 | 46.5 | 60.5 | 82% |
| Australia | 7.7 | 12.1 | 46.3 | 58.4 | 58% |
| Israel | 7.6 | 9.6 | 60.4 | 70 | 26% |
| Malaysia | 16.1 | 23.6 | 53 | 76.6 | 46% |
| Saudi Arabia | 54.3 | 54.3 | 38.9 | 93.2 | 0% |
| Singapore | 16.1 | 20.3 | 60.8 | 81 | 26% |
| United Kingdom | 9.5 | 14.7 | 43.8 | 58.5 | 55% |
Women may be driving the next wave of digital banking
In the early years of digital banking, customers tended to be high-income earners and male. However, the tide is turning. Brazil has seen slightly more women open a digital-only bank account—an exciting indicator with implications for other markets—and adoption among women is growing in Ireland, Germany, Sweden, Belgium, France and Norway too. We also gained insights into the diverse incomes of digital-bank customers. Though the majority of customers are on the higher end of the income spectrum, this is also seeing a shift. Spain, for example, has the highest adoption of the service among middle-class customers in Europe, while Ireland, Finland, Norway, Italy and France continue to see their share of low-income digital banking customers increase.
Another fascinating trend is the age of digital-bank users. Often considered a service for the younger generations, digital banking in Europe is taking off among middle-aged customers too—like in Italy, where nearly one in two customers is over 45 years old. This shows that the benefits of digital banking are compelling to a broad range of customers, regardless of gender, age, or income.
"As digital banks continue to grow at a rapid pace and scale internationally, we see a huge opportunity for these players to create value for banking customers that the world has not seen before. From our research, it is clear that a new path for banking - one that is digital and driven by innovation - has been accelerated by the pandemic. However, digital banks must remain committed to winning trust with the bankable population to drive the lasting change they wish to see in the industry". Dr. Nils Beier, Managing Director, Banking & Public Sector Strategy Lead at Accenture
The results are clear—digital banking is poised to grow strongly
In the end, the results were clear—digital banking is taking off, and will only become more prevalent in the years to come. Obstacles remain, including earning trust and overcoming unfamiliarity with digital offerings. And yet the drivers—simplicity, convenience, value, and safety—have seen conversions grow sharply. As everyone, incumbents and challenger banks alike, converge on a digital end-game, the leaders that are dedicated to creating a seamless, trustworthy experience for customers will come out on top. Want to dive deeper into our insights to learn more about the state of digital banking? Simply tap the link below to download the report.
Methodology
For any questions regarding the methodology behind this project, please reach out to press@n26.com.
Digital banking has gained significant traction in recent years, with millions of consumers worldwide opting for mobile banking services. N26, a prominent mobile bank, has partnered with Accenture to gain insights into consumers' attitudes towards digital banking. Their analysis is based on Accenture's 2020 Global Banking Consumer Study, which surveyed over 47,000 customers across 28 markets [[1]].
Growth and Success of Digital Banks
The banking industry is experiencing digital disruption, driven by a global demand for simpler and more intuitive services. Digital banks, both innovative newcomers and traditional incumbents undergoing digital transformation, are gaining trust with consumers. This growth and success demonstrate the promise of the digital banking market. In just a few years, millions of customers have switched to digital banking due to its ease and convenience, a trend that has been accelerated by the COVID-19 pandemic [[1]].
Current State of Digital Banking
According to the study, approximately 23% of the population across the 28 surveyed countries already have a digital bank account, representing an estimated 450 million customers. However, the analysis suggests that this number could grow to at least 70% in most regions, indicating a significant untapped market for digital banks. It is estimated that there could be as many as 1.4 billion potential customers across these countries who have yet to adopt digital banking [[1]].
Drivers and Barriers to Digital-Only Banking
Trust in the financial institution is a key driver for digital bank adoption worldwide. The main drivers identified in the study include a simple and convenient mobile app and website experience, clear and simple bank communications, and competitive pricing. These factors also serve as incentives for customers who do not currently bank digitally to consider switching. However, there will still be a proportion of consumers who remain skeptical of digital banks. Some are content with their current provider, while others are unfamiliar with the offerings of digital banks. Despite this, a clear value proposition could convert a significant portion of the bankable population to digital banks [[1]].
Countries Leading in Digital-Only Banking Adoption
Certain countries are leading the charge in digital-first banking. Saudi Arabia, the United Arab Emirates, Brazil, and China have the largest share of their respective populations already using a digital bank. Western European countries, such as Spain, Germany, Belgium, Italy, and the Netherlands, have also seen accelerated customer acquisition in recent years. Looking ahead, China and the United States are expected to experience strong digital-only banking adoption, potentially reaching 771 million and 148 million digital bank customers, respectively [[1]].
Women and Low-Income Earners in Digital Banking
The study highlights that women are increasingly opening digital-only bank accounts, with Brazil leading the way in this trend. Adoption among women is also growing in Ireland, Germany, Sweden, Belgium, France, and Norway. Additionally, the income spectrum of digital bank customers is becoming more diverse. While the majority of customers are on the higher end of the income scale, countries like Spain are seeing higher adoption among middle-class customers. Ireland, Finland, Norway, Italy, and France are witnessing an increase in the share of low-income digital banking customers [[1]].
Age of Digital Bank Users
Contrary to the perception that digital banking is primarily for younger generations, the study reveals that middle-aged customers are also embracing digital banking in Europe. For example, in Italy, nearly half of the customers are over 45 years old. This indicates that the benefits of digital banking appeal to a broad range of customers, regardless of age, gender, or income [[1]].
In conclusion, the study conducted by N26 and Accenture highlights the significant growth and potential of digital banking. Trust, simplicity, convenience, and value are key drivers for digital bank adoption. While obstacles remain, digital banking is poised to become even more prevalent in the coming years. The leaders in the industry will be those who prioritize creating a seamless and trustworthy experience for customers [[1]].
