SHENZHEN, China, Sept. 26,
2024 /PRNewswire/ -- China's first digital-native
bank, WeBank, and global management consulting firm Oliver
Wyman have jointly launched a new report titled "Global
Digital Banking: Development and Innovation Trends".
The report offers an in-depth analysis of the development of global
digital banks and insights into the future trajectory and
competitive landscape of the industry.
According to the report, the number of digital banks has
significantly increased over the past decade, driven by
technological advancements and the need for financial inclusion. By
the end of 2023, the global count of licensed digital banks had
reached 235, while the number of players offering broader digital
banking services had already exceeded 300. Among them, many leading
global players have achieved commercial success in terms of
business scale and profitability, thereby driving innovation and
fostering a more dynamic financial services industry.
Exhibit 1: Number of licensed digital banks
worldwide
2014 - 2023
Note: Only includes institutions that have obtained banking
licenses from national regulatory authorities or have special
"virtual bank" licenses
Source: The respective financial regulators of various countries
and regions
THE DEVELOPMENT OF GLOBAL DIGITAL BANKS REVEALS
COMMONALITIES
Digital banks started to emerge worldwide between 2009 and 2014.
With fintech advancements and regulatory support, digital banking
initially developed in Europe and
North America, but it has also
developed rapidly in Asia and
South America thanks to strong
demand from unserved and underserved populations.
The development of digital banks worldwide varies significantly
due to the different circumstances of their home markets, resource
endowments, and business choices. The report highlights that in
recent years, global digital banks have been exploring sustainable
business models, diversified business lines, unique ecosystem
resources, multi-market operations, and innovation in technological
and data infrastructure. According to the report, these five themes
are key factors that will widen the gap between industry leaders
and followers.
Global digital banks strive to establish sustainable business
models and diversify their revenue streams to meet the unique needs
of their customers. Currently, there are two types of
business models that have proven to be commercially effective. In
markets with large populations, digital banks typically adopt a
retail-driven model, focusing on serving a broad customer base. As
digital banks acquire a significant user base, they can leverage
technology to enhance operational efficiency and thus increase
profitability. In markets with smaller populations, digital banks
tend to concentrate on specific niche customer groups or sectors
with high potential returns, such as small and medium enterprises
(SMEs) and the auto financing sector.
These models enable digital banks to navigate diverse market
environments, enhance customer experience, and improve operational
efficiency through innovation and technology.
Furthermore, many digital banks have been exploring diversified
revenue streams. They offer Banking-as-a-Service solutions,
monetize their in-house technological capabilities, and provide
non-financial services to SMEs. These initiatives have contributed
to improved profitability and enhanced valuation for digital banks
in the capital markets.
Global digital banks have been capitalizing on the unique
resources within their ecosystems and expanding their operations
across multiple markets. By embedding their services within a
specific ecosystem, digital banks can offer customers seamless user
experience. Additionally, they can leverage alternative data within
the ecosystem to enhance customer acquisition, product pricing, and
risk management while ensuring compliance.
Digital banks, with diverse backgrounds and available resources,
employ different strategies when leveraging their respective
ecosystems. Some digital banks develop their own super applications
that integrate their financial services, creating an ecosystem that
offers comprehensive solutions for customers. On the other hand,
digital banks that have transformed from traditional banks aim to
capitalize on the resources accumulated by the incumbents. They
collaborate with external partners and share ecosystem resources to
enhance their offerings.
Global digital banks are dedicated to facilitating the
development of data infrastructure and driving industry
innovation. They not only play a crucial role in the
circulation of data but also act as facilitators and promoters,
driving the circulation and sharing of data elements to build a
robust data ecosystem. By actively participating in the circulation
and sharing of data, digital banks can fuel their own growth and
have a broader positive impact on the development of financial
infrastructure.
DIGITAL BANKS WILL CONTINUE TO DRIVE INNOVATION AND
COMPETITION IN THE FINANCIAL SERVICES INDUSTRY
When digital banks first emerged, they were often perceived as
"challengers" or "disruptors" in the banking industry. However, as
their business models prove to be effective and regulations mature,
digital banks are now being seen as "catfish" for healthy
competition instead. They are being introduced into the local
banking system to motivate incumbents and improve the overall
performance of the industry.
Leading digital banks have already reached economies of scale
and strong profitability, according to the report. In the coming
years, gaps between leaders and followers are expected to widen in
terms of profitability, market coverage, and influence over
industry standards, which may be gradually established. The
technical standards and risk management models of leading players
could be adopted as common industry standards, promoting the
consistency and overall development of the digital banking
sector.
As a result, there will be different challenges for digital
banks worldwide. For Chinese digital banks, they will face
increasing challenges as global peers accelerate their own growth.
The next focus for Chinese digital banks will be addressing the
challenges posed by new technologies, new standards, and new models
from digital banks in other regions, as well as expanding their
services to a broader market.
Arthur Wang, Chief Financial
Officer and Secretary of the Board of Directors of WeBank,
said: "As the first digital bank in China, WeBank has always been committed to
serving the public and MSMEs. We offer differentiated digital
financial services and continuously explore new models to promote
financial inclusion and support the real economy. We have pioneered
a path of digital financial inclusion that is 'controllable in
risk, affordable in cost, and sustainable in business.'" Looking
forward to the future of digital banking, Wang added,
"WeBank will continue to leverage its innovative fintech
capabilities, collaborate with various industries, and contribute
to high-quality development."
Hang Qian, Partner and the
Head of Oliver Wyman's Financial
Services Greater China added: "As technologies such as
artificial intelligence, Web 3.0, the Internet of Things, and the
metaverse continue to advance, the digital banking industry will
witness ongoing innovation in applications, products, and services.
The emergence of new technologies will further drive the evolution
of digital banks' structure and operations, ultimately increasing
the industry's overall value. The boundaries between traditional
and digital banks will gradually blur as these innovations reshape
the global banking industry, bringing new momentum to its
development and transformation."
About WeBank
Launched in 2014, WeBank Co., Ltd. ("WeBank") is the first
digital bank in China. WeBank provides convenient financial
services to micro-, small- and medium-sized enterprises (MSMEs) and
the public, and continuously improves the quality of services in
response to customers' specific needs. WeBank now ranks 255 in the
Top 1000 World Banks by The Banker.
WeBank focuses on innovation and technology. WeBank has
maintained its proportion of technical personnel above 50% since
its establishment, while its research and development expenses of
accounted for around 10% of its revenue. WeBank is now at the top
of the industry in core technologies such as artificial
intelligence (AI), blockchain, cloud computing and big data.
About Oliver Wyman
Oliver Wyman, a business
of Marsh McLennan (NYSE: MMC), is a management consulting
firm combining deep industry knowledge with specialized expertise
to help clients optimize their business, improve operations
and accelerate performance. Marsh McLennan is a global leader in
risk, strategy and people, advising clients in 130 countries across
four businesses: Marsh, Guy
Carpenter, Mercer and Oliver
Wyman. With annual revenue of $23
billion and more than 85,000 colleagues, Marsh McLennan
helps build the confidence to thrive through the power of
perspective. For more information, visit oliverwyman.com, or follow
on LinkedIn and X.
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SOURCE WeBank Co. Ltd.
