Digital banking : the shift to profitability

The results of the 6th D-Rating campaign on retail banks’ digital performance, published on February 21, confirm that the battlefront in the digital war has shifted from more and more digital customers to more and more value generated with them.

In the second half of the 2010s, the arrival on the market of second-generation digital banks (neo-banks), with their ultra-simplified account opening process, had provoked a war of movement oriented towards the mass recruitment of new customers. The battle had lost its intensity during the health crisis. Because holding an additional account, whose advantages were largely based on the services available during travel, became less useful during periods of forced immobility, even with low or even zero monthly fees. Because the incumbent leaders have used the period to upgrade their enrollment paths and integrate the most used features for everyday banking.

In 2022, this new configuration is reflected in the very sharp slowdown in the number of new users of digital channels: 5% on average between Q4 2021 and the same period in 2022, for the retail banking mobile applications of the 110 European banks regularly studied by D-Rating, and 3.2% for the corresponding websites. The trend is even negative in some Northern European countries, which were ahead of the curve in terms of the digitalization of banking practices (-4.6% of mobile users in Belgium and the Netherlands, -3.4% in Scandinavia and Finland, -3.3% in Germany), suggesting that some customers are tending to refocus on their main account.

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There are a few exceptions – Boursorama, Fortuneo, Orange Bank and Nickel in France, Révolut and Monzo in the UK, Fineco Bank, Illimity Bank and Webank in Italy, Bank Norwegian in Norway – whose increase in the number of mobile users, all of which exceeded 20%, more than likely reflects strong recruitment performance.

Digitalization of the banking identity as the last step to speed up account opening

As clearly discussed in previous articles about Digital Proposition, the digitization of the account opening process is no longer a competitive advantage. Banks from all different parts of Europe have managed in majority to offer a digital, fluid (to some extent, bug free) and transparent account opening. The late banks that do not offer this journey online, do so because they believe the acquisition should be managed physically and follow rather a strategic choice even when technically they can.

The slight differences that can set a bank or even a whole region a part from another is through the local specificities a consensus of banks can offer to their customers to make it the onboarding faster.

The Scandinavian countries with BankID are a good illustration of this, or even Itsme in Belgium. Banks working in collaboration to create a “virtual” identity that can be used beyond the banking field, that will allow to speed up the process especially for identity verification.

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However, analysis of data on the average number of visits per month, in other words the use of digital channels to manage all day-to-day banking operations, points to a refocusing of consumers on their main account: between the end of 2021 and the end of 2022, the frequency of connection has remained stable for network banks, and it has decreased – by an average of one visit per month – for digital banks, even though it was already lower than that of their competitors. The refocusing movement therefore seems to be primarily benefiting the historical players.

For the banks’ economy, the end of the commercial war period is in itself virtuous, in that it allows them to better control their marketing expenses.

This new configuration also gives more latitude to digital teams to focus on expanding the online offer, going beyond the mere management of everyday banking, and integrating into sites and applications products whose profitability is increased by higher interest rates.

D-Rating has endeavored to take this into account by increasing the weight of the banking offer in its rating (extent of the offer presented, but also the ability to subscribe to it and to manage the various parameters on the sites and applications).

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