Digital banks are driving customers to their ranks, from awareness to account opening, with digitally native marketing strategies and value propositions. Streamlined account-opening flows are helping them close the deal.
A new report from Insider Intelligence delves into what incumbent banks stand to lose from the rise of a specific kind of digital-only bank—neobanks—and how they can strike back.
What incumbents stand to lose to neobanks:
New digitally-opened accounts. US digital-only bank account openings were stung by the coronavirus pandemic. But the future is theirs:
Fee revenues. Bowing to the pressure from neobanks to remove fees (such as overdraft or account maintenance fees) eliminates a major source of revenues for banks:
Access to select consumer segments. As neobanks use tailored services to make inroads with often-underbanked consumer demographics, traditional banks’ long-term customer acquisition efforts could suffer a death by a thousand cuts.
Primary banking relationships. Only 11% of US adults held their primary checking account at a digital bank in December 2020, per Cornerstone Advisors cited by Forbes.
Incumbents aren’t helpless. Here’s how to counter the neobank threat
These three best practices range from small (low maturity) to aggressive (high maturity):
For a deeper dive into the rise of neobanks and the major disruptors that could rattle the competitive dynamics between incumbents and challengers, as well as the wide range of counterattacks available to traditional banks, read “The US Digital-Only Banking Revolution: How Legacy Banks Can Hit Back as Neobanks Take Off.”
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