Digital banking refers to the digitisation of financial services – interacting with customers primarily through a combination of desktop, online, tablet, wearable, and API-enabled touchpoints but also increasingly digitised or digitally enhanced in-person experiences.

Listed below are the top digital banking predictions, as identified by GlobalData.

Incumbent banks will continue the battle cries of “we’re spending X amount on transformation,” but few will realise the true goal of digital transformation – digital reinvention. Most will end up digitising an existing analogue business rather than building new digital capabilities to reimagine what banking means for a digital age.

After a decade of skeptics variously poo-pooing new digital banks for “not getting users, primary accounts, or net interest margin,” the top few – Monzo, Chime, etc. – will quietly and unceremoniously begin to do all three. As they become part of the banking furniture, the honeymoon period will end.

This will squeeze smaller me-too digital banks, both for user numbers and venture capital funding. Increasingly, these firms will pivot to business-to-business (B2B) and BaaS to non-financial brands that already have a large, loyal customer base (meaning a lower cost of acquisition) and enter banking.

More firms will leverage their brand’s shared community or identity to enter financial services, with Airbnb a bank for landlords, Netflix a bank for gig economy film workers, Uber already one for drivers, etc..

This will push slower-moving incumbents deeper into the ‘plumbing’ – providing just core products (i.e. ‘the coal’) – while digital leaders will purposively move ‘up’ into what core products enable (e.g. lighting, or in FS’ case, lifestyles). In doing so, banks protect themselves from those ahead of them in the value chain, begin to reach more customers earlier in their purchase journey, and unearth adjacent needs pre and post the underlying financial product required.

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Digital banking will grow in emerging markets

Emerging markets will offer the fastest growth conditions for new digital banks. Especially those that are able to leverage non-traditional credit risk assessment and infrastructure-lite distribution to serve rural SMEs, as MYbank, WeBank, and Nubank have. However, digital in these markets, Africa especially, will increasingly involve bricks, with providers such as TymeBank in South Africa opening 700 kiosk branches in 2019.

Big Tech firms will emerge as direct banking competitors in 2020. Already, Apple Card is in the market with Goldman Sachs with basic personal financial management (PFM) features. It will likely become a digital deposit account soon. Google (Alphabet Inc.) offers a checking account with Citigroup and Stanford Credit Union, while Amazon is in talks with JP Morgan.

This is an edited extract from the Banking & Payments Predictions 2020 – Thematic Research report produced by GlobalData Thematic Research.