The battle for digital customers - a global perspective

• In nine of the 26 markets under review, neo-banks or digital-only FIs outperformed commercial banks in digital user growth per month
• The top growth players in the respective categories are Wechat Pay (platform), ICBC China (domestic commercial bank) and Citibank (global commercial bank), Webank China (neo-bank) and ING Group (digital-only bank)
• There has been a rapid increase in the growth in digital users per month among some neo-banks and payments platforms since the beginning of 2018

In a global survey which assessed 100 financial institutions across 26 key markets on how well they performed in regards to the growth of digital users per month .  Asian Banker Research compared top-tier commercial banks with three other categories of financial institutions, ecommerce/payments/marketplace platforms, neo-banks and digital-only banks set up by commercial banks.  

In  China, Vietnam, Korea , Japan, India, Brazil, Spain, Germany and  the UAE, neo-banks or digital-only FIs outperformed commercial banks in digital user growth per month. However, top tier commercial banks in six out of ten markets such as the US, Canada and Australia continue to outperform neo-banks or digital-only FIs in acquiring and retaining digital customers, with their high-touch high-tech distribution strategy.

Overall, Chinese financial institutions and banks, and global platforms achieved the highest five-star rating with growth of more than one million digital users per month.

Commercial banks’ digital users grew slower in 2018

For domestic commercial banks, 2015 to 2017, was a key period in digital user conversion and growth. We however observed that since 2018 many have seen decelerating digital user growth.

On the contrary, global or regional operating commercial banks inched further up in digital user growth since beginning of 2018 compared to the period between 2015 and 2017.

Santander and BBVA further increased their growth in digital users per month by 32% each in the first half of 2018 compared to the period January 2016 to December 2017. By contrast,   Citibank Global outgrew its peers with growth of at least 400,000 digital active retail customers per month between July 2016 and December 2017, it saw a dramatic drop in the first six months of 2018. It grew by only 150,000 new users per month.

Platforms dominate in the category of more than one million digital users per month

Graph 1:  Overview of global survey of financial institutions on growth of digital users

Note:
(1) Represents mainly global or large multi-regional banks.
(2) We observed that most first tier commercial banks from smaller countries such as UAE grew their digital user base between 5,000 and 10,000 per month for the period 2016 to 2017. In city-states such as Singapore and Hong Kong commercial banks grew their digital user base between 10,000 and 19,999 per month for the same period. Those were not included. Hence, 4% and 6% present an underestimated figure for this category.
Source: Asian Banker Research

The growth of payments and money transfer platforms

The largest jump in 2018 in digital user growth was Transferwise. It was able to grow its digital user base from January to September 2018 by 167,000 per months as compared to 24,000 users per month in period from January to December 2017. It took Transferwise seven years to reach two million digital users, while it took only nine months in 2018 to double this number.

International payments and money transfer companies such as Transferwise and WorldRemit have breached the ceiling of acquiring more than 100,000 users per month in 2018.  According to WorldRemit, over 100,000 digital sign-ups per month were added in September 2018, with a maximum growth of 125,000 in May this year. It crossed the 70,000 users/months in July 2017.  Between July 2016 and July 2018 digital sign-ups grew by 124%.

Based on industry data, Apple Pay grew its global customer base from January 2015 to December 2017 by 3.5 million users per month. Between January 2018 to August 2018 it added 15.6 million new digital users per month.

38% of commercial banks achieved a four-star rating

In our survey, 41% of commercial banks grew their digital user base by between 20,000 and 99,999 per month, while 38% of them, mainly representing global or large regional banks achieved a four-star rating by growing between 100,000 and 999,999 digital users per month. Among them are Citibank, Santander, BBVA and a series of commercial banks in large markets such as India, Brazil, US some African countries, Thailand and South Korea. JP Morgan Chase is currently the fastest growing commercial bank in the US and Kasikornbank Thailand outperformed all of its peers based on country population. The survey also found that HSBC and Standard Chartered are no longer the global digital powerhouses they once were in the first decade of the 21st century with HSBC only achieving a two-star rating.

Neo-banks struggle to scale but some shine

Sluggish growth appears to be affecting neo-banks. The large majority of them in mature markets are struggling to achieve scale, and they are often those with a single market focus. In our listing, 21% of all neo-banks obtained a zero-star rating which is defined by a digital user growth of less than 10,000 per month, making them vulnerable to potential acquisition or merger by commercial banks. 48% of neo-banks achieved a one- or two-star rating growing between 10,000 and 49,999 users per month. A few neo-banks in Europe and the US have seen a dramatic rise in digital users since the beginning of 2018 in particular Revolut, N26 and Monzo in Europe and Chime in the US. Revolut has seen the most significant rise in digital user growth per month. From July 2015 to October 2017 it added on average 34,000 digital users per month. This increased in line with their global expansion to 157,700 digital users per month for the period from November 2017 to November 2018. Revolut is the only neo-bank, together with Marcus in the US, which achieved a three-star rating.

Digital-only banks saw mixed results in digital user growth per month

Only two digital-only banks run by commercial banks, Digibank India by DBS (Asia) and BankMobile, a division of Customers Bank (US), achieved a three-star rating, while ING Group (Global) was the only digital-only bank that achieved a four-star rating. 53% of financial institutions in this category grew by less than 19,999 users per month. However, if we standardise digital user growth per month based on country population, Liv by Emirates NBD in the UAE is the best performing digital-only bank followed by ING Direct in Australia.

Platform players dominate list of top digital financial institutions

Table 1 Growth in digital users per month  (#)

Notes:

(1) active digital users as defined by the FI
(2) estimated based on indirect data such as active ratios, total customer, growth, or retail digital user base
(3) mobile banking users only
(4) According to Citibank reports active digital consumer banking users grew by 337,500 per month between July 2016 and June 2018. Asian Banker Research applied an 85% digital active rate to determine total registered digital consumer banking base.
(5) ‰ of total population is defined as the growth of digital users per month divided by total country population and measured in per mille = 1/1000
(6) To determine ‰ for multi-regional FIs we aggregated the number of population by country.