Digital banks - statistics & facts
The financial landscape is undergoing a profound transformation, with digital banks emerging as a disruptive force in the banking industry. The promise of technology-driven financial services has captivated both consumers and investors, signaling a potential revolution in personal banking. By 2023, the number of licensed digital banks worldwide had expanded to 235, with Asia and Europe leading the global landscape in terms of digital banking proliferation.
However, this expansion has recently shown signs of deceleration. From a peak of 36 new digital banks launched in 2019, the number has dramatically dropped to just seven in 2023. This trend may indicate the industry's transition to a more mature phase, characterized by strategic consolidation and a focus on sustainable growth and innovation.
The evolving landscape has not gone unnoticed by traditional financial institutions. The share of bank and credit union executives who view challenger banks as a significant threat nearly doubled in 2024, reflecting a growing recognition of digital banks' transformative potential. As these institutions expand their user base and demonstrate increasing profitability, traditional financial institutions are being compelled to reassess their strategic approaches in an increasingly digital financial ecosystem.
However, this expansion has recently shown signs of deceleration. From a peak of 36 new digital banks launched in 2019, the number has dramatically dropped to just seven in 2023. This trend may indicate the industry's transition to a more mature phase, characterized by strategic consolidation and a focus on sustainable growth and innovation.
Performance and potential: digital banks’ competitive landscape
Despite their innovative approach, digital banks continue to lag behind traditional financial institutions in key financial metrics. As of 2024, incumbent banks maintained a significant advantage, holding approximately 13 times more customer deposits compared to digital banks. Profitability has also been a challenge, with many digital banks struggling to achieve consistent financial success. Notably, Revolut only reported its first meaningful profitable year in 2023, marking a critical milestone for the bank. However, digital banks have demonstrated remarkable strengths in customer acquisition and operational efficiency. Leading digital banks have shown extraordinary growth in customer base, with Nubank gaining over 19 million customers in just one year, and Revolut attracting nearly 12 million. Operational efficiency stands out as another key advantage, with top-performing digital banks showcasing impressive financial metrics. SoFi, for instance, generated 409 U.S. dollars in revenue per customer while maintaining a cost-to-serve of 173 U.S. dollars, while Starling Bank achieved 279 U.S. dollars in revenue per customer at a remarkably low cost-to-serve of 94 U.S. dollars in 2023.Market leaders: the digital banking powerhouses
While numerous digital banks have emerged globally, two standout players have distinguished themselves: Nubank and Revolut. In a landmark achievement, Nubank crossed the 100 million user milestone in May 2024, while Revolut celebrated reaching 50 million users in November 2024. These institutions not only lead in customer acquisition but were also recognized as the two most valuable digital banks worldwide in 2024. Upon reaching the 100 million milestone, Nubank joined the exclusive ranks of digital banks with over 100 million customers, a club that includes only WeBank and Rakuten. By hitting the 50 million milestone, Revolut ranks as the fifth largest digital bank globally.The evolving landscape has not gone unnoticed by traditional financial institutions. The share of bank and credit union executives who view challenger banks as a significant threat nearly doubled in 2024, reflecting a growing recognition of digital banks' transformative potential. As these institutions expand their user base and demonstrate increasing profitability, traditional financial institutions are being compelled to reassess their strategic approaches in an increasingly digital financial ecosystem.
