Jul 2019

Little over a month back, we talked about the next frontier of digital transformation in the banking industry as banks gear up to tackle competition from Fintechs – one that would be fueled by new digital business models, agile processes, data-driven culture and design thinking.


Last week when Mr. Tharman Shanmugaratnam, Senior Minister and Chairman, MAS, announced 5 new Digital Bank licenses in Singapore he called them “Banking liberalisation’s next chapter”. This further validates our belief that the Banking industry isn’t just on the cusp of transformation, it’s already transforming and traditional financial institutions can no longer afford to look the other way.

While Digital Banks may seem like a recent phenomenon in Asia, they have actually been making headlines in the European financial sector since 2017 with players like Monzo, Atom Bank and Starling Bank attracting million dollar investments. Since then they have been a global phenomenon – from Fidor in Germany to 86 400 in Australia, from Bnc10 in Spain to WeBank in China – Digital Banks are here to stay and grow.

Known as  Digital Banks, Challenger Banks or Neo Banks, they may be completely digital, mobile offering or established firms with limited digital-only offshoots but there’s one common thread that defines this industry – they provide mobile-first, branchless banking services.

Digital Banks outside Europe

Asia may be the new kid on the block but it’s been quick on the uptake. A surprise entrant in this growth story is the continent of Africa.

Earlier in 2019 Hong Kong announced 8 Virtual Bank licenses, ING Bank launched a fully-digital mobile retail bank in the Philippines, Standard Chartered Bank launched its first digital retail bank in Côte d’Ivoire in 2018 with plans to expand across Africa before moving on to Hong Kong.

How can incumbents prepare for this competition? What does the blueprint of their transformation playbook look like?

We at Happy Marketer attempt to answer these questions through our work with clients in the financial sector while crafting their Digital Transformation journey. Here are our 2-cents from that experience.

Agility & Customer Centricity are the name of the game

Challenger banks don’t come with the baggage of legacy systems and cumbersome organization structures, shackles that traditional financial institutions are finding difficult to shake off.

Agility and Customer Centricity are in the DNA of Digital Banks. They grew bottom-up, to address unmet demand gaps in the market. Their business models are nimble, quick to pivot and reinvent at every change of customer behaviour. They act quickly, fail quickly, learn even more quickly and step-change their way to success. They would rather fail-fast than succeed after tides have ebbed.

Incumbents, on the other hand, are bound by centuries of established processes, regulations and ways-of-working. They come with a legacy of products and services resulting in a top-down approach to business. Customers come last in their marketing funnels. Effecting change is an arduous journey around processes, regulations and bureaucracy that can wear down even the best amongst us.

In short, it’s mammoths against wolves. And we all know who survived the Ice Age.

Brand Trust & Reputation are irreplaceable assets. Banking existed before Digitization, it will exist long after!

Traditional financial institutions have built their Brand Reputation over decades. They have consistently provided the best financial service to their customers.

Now as we have often said before, incumbents have also been innovating their products, offerings and services for the larger part of the past two decades with online banking, mobile banking and the likes.

Now they are tackling the Digital Bank tsunami by creating niche offshoots of their existing services in digital-only formats, case in point Standard Chartered Digital Bank in Africa and Hong Kong, ING Digital Bank in the Philippines.

Challenger banks offer niche products only – mainly checking accounts and microloans. For the full suite of retail banking services such as credit cards, mortgages, wealth management etc. customers still look to go to traditional banks.

Digital Banks have to work hard to build this level of the trusted consumer base, as well as innovate around legacy business models that have survived the test of time. A mammoth task, but definitely not impossible to catch up on.

As Jimmy Ng, the Incoming Head of Technology and Operations at DBS, succinctly puts it, “The question behind the worth of a challenger bank may come down to this: would you put two million dollars in a challenger bank?”

The proof of the pudding will always be in the eating – who YOU trust your hard-earned money with will determine who will come up on top of the financial industry pyramid.

Which takes us back to Customer Centricity!

Knowledge, Experience & Regulation have no substitutes – but avoid the complacency trap

The financial industry is mired in regulation, and for good reason. Incumbents have a head start in this race. They have been in the trenches for decades, industry knowledge and context can neither be replaced nor created overnight.

But for too long now banks have felt safe in this cocoon, considering knowledge & regulation to be insurmountable barriers for new players and startups. But it takes only one David to bring down Goliath – it took one Amazon to change the face of centuries-old Retail industry, one Uber to change the transportation game – we are always one step away from threat, and complacency is our biggest enemy.

Today it is Digital Banks, yesterday it was cryptocurrency, day before yesterday it was mobile banking, tomorrow it may be something completely different.

The key to staying relevant lies in being proactive rather than reactive and staying ahead of the innovation curve. It’s not about creating that offshoot Digital Bank but about creating the Digital Transformation Unit that is thinking about your next 5 or 10 years growth trajectory. It’s not about meeting the threat today but about pioneering new threats in the industry and being nimble enough to change with the times.

A Global Phenomenon

Digital Banks are no longer a blip on the radar, they have spread far and wide since the early days in Europe. In fact, even beyond Asia, Africa has emerged as a hotbed for Digital Bank growth. In our next blog, we will share a slice of our experience in the region while being part of a Digital Bank launch in Africa.


Srotoswini Roy
Srotoswini Roy

Director Digital Transformation, quick-witted 🧠 with a silver tongue and a knack for getting things done ✅

At work, she channels her empathetic listening and articulate solutioning skills to cultivate strong, symbiotic relationships with clients 🤝, keeping a sharp eye on business growth both for her clients and her firm 📈

Off work, you’ll find her whipping up new dishes 🍲 inspired from her travels and her mother’s cookbook, planning her next vacation 🏖️, lost for hours in a book 📚, or dancing away to her heart’s content 💃🏻