# Digital banking: Traditional banks vs. fintech providers Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-04-26 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: Traditional vs Fintech: The Future of Digital Banking Meta Description: Learn why customers are switching from traditional banks to challenger banks like Monzo & Revolut for a more personalised and innovative banking experience. URL: https://financedigest.com/digital-banking-traditional-banks-vs-fintech-providershtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/istock-1304484797-1736814099242-compressed.jpg) # **Digital banking: Traditional banks vs. fintech providers** ![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/amit-dua-1736814099304-compressed.jpg) _By_ **_Amit Dua,_** _President, SunTec_ The global digital banking market was worth $12.1 billion in 2020 and is expected to hit approximately $30 billion by 2026. It’s clear that this fast-growing, lucrative space is not just for traditional market players like high street banks anymore – but for emerging fintech providers too. A key [trend in this sector that is set to accelerate is digital-only banking](https://www.financedigest.com/customer-engagement-trends-that-will-rule-banking-and-financial-services-in-2021.html "Customer Engagement Trends that Will Rule Banking and Financial Services in 2021") accounts such as Monzo, Starling and Revolut. In the UK, 14 million adults already bank with [digital only accounts](https://www.financedigest.com/accountants-cant-afford-to-ignore-making-tax-digital.html "Accountants can’t afford to ignore Making Tax Digital"), a three-fold increase since 2019 – and that number is expected to hit 23 million by 2027. Notably, 41% of digital-only banking account holders are Generation Z adults, and [nearly half](https://www.financedigest.com/another-lockdown-is-the-top-concern-of-nearly-half-of-uks-small-businesses.html "Another Lockdown is the Top Concern of nearly Half of UK’s Small Businesses") of all digital-only accounts (47%) have just a £1,000 average balance. So, what does this [mean for traditional banks](https://www.financedigest.com/does-the-monzo-effect-mean-banks-will-need-to-rethink-brand-building.html "Does the ‘Monzo effect’ mean banks will need to rethink brand building?")? Why are customers moving from an HSBC or Barclays [current account](https://www.financedigest.com/current-assets-in-accounting.html "Current Assets In Accounting") to the Monzo app? The answer lies in personalisation. [Challenger banks](https://www.financedigest.com/the-rise-of-challenger-banks.html "Challenger banks") like Monzo have the agility and speed in innovation to meet customers’ needs in terms of their lifestyle choices. And even if this need constantly changes, new and emerging banks are better able to offer more, that is hyper-personalised and highly appealing, such as attractive [pricing and simple account opening](https://www.financedigest.com/wall-street-set-to-open-higher-oil-prices-extend-losses.html "Wall Street set to open higher, oil prices extend losses") for money transfers and day-to-day transactions. A key differentiator is their ability to provide very detailed, real-time bank balance and transfer notifications – something traditional [banks cannot do as easily because of their existing core legacy](https://www.financedigest.com/how-digital-innovation-in-challenger-banks-encourages-legacy-banks-to-perform-better.html "How digital innovation in challenger banks encourages legacy banks to perform better") systems. For many people, challenger banks offer a better [customer experience](https://www.financedigest.com/the-new-client-adviser-experience-in-the-age-of-the-customer.html "The New Client-Adviser Experience in the Age of the Customer") and give them the products and services they need when they need them – and this is a key test for incumbent banks. Although fintech providers are naturally more nimble and perhaps less complex in nature, there are many areas where high street banks are still superior in the [digital](https://www.financedigest.com/de-surinaamsche-bank-expands-relationship-with-fiserv-to-upgrade-core-banking-platform-and-add-new-digital-banking-capabilities.html "De Surinaamsche Bank Expands Relationship with Fiserv to Upgrade Core Banking Platform and Add New Digital Banking Capabilities") banking space. They have developed solid and secure digital channels and processes and unparalleled customer [service support](https://www.financedigest.com/bny-mellon-strengthens-support-for-treasury-services-clients-in-germany-with-appointment-of-gungor-taner.html "BNY MELLON STRENGTHENS SUPPORT FOR TREASURY SERVICES CLIENTS IN GERMANY WITH APPOINTMENT OF GÜNGÖR TANER"). For instance, with NatWest or HSBC you can speak with a [banking representative about your banking matters almost any time you need](https://www.financedigest.com/what-banks-need-to-do-right-now-to-improve-their-digital-services-without-sacrificing-security.html "What Banks Need to Do Right Now to Improve Their Digital Services Without Sacrificing Security "). Many of the digital-only [banks offer](https://www.financedigest.com/why-the-banking-industry-needs-to-offer-more-than-just-enticing-perks-and-subscription-services.html "Why the banking industry needs to offer more than just enticing perks and subscription services") online support only. High street banks also have the advantage of inherent trust which they can use to their advantage, as many [customers have a legacy of confidence in their traditional banks](https://www.financedigest.com/canadian-banks-fighting-brokers-back-for-customers.html "Canadian Banks Fighting Brokers Back For Customers"). While high street banks have the right digital processes in place, it’s the end user [customer experience](https://www.financedigest.com/video-collaboration-is-pushing-the-boundaries-of-the-customer-experience-in-financial-services.html "Video Collaboration is pushing the boundaries of the customer experience in Financial Services") that’s currently inadequate. Many of these banks aren’t agile enough to [streamline digital processes](https://www.financedigest.com/emvco-streamlines-approval-process-for-mobile-payment-devices.html "EMVCo Streamlines Approval Process for Mobile Payment Devices") like a fintech provider due to the complexity of their back-office legacy systems. To truly lead the way in digital banking and particularly make their offering attractive to Generation Z, these [banks must strategically analyse what applications directly impact their customer](https://www.financedigest.com/banks-can-provide-a-protective-shield-to-defend-customers-from-cyber-attack.html "Banks can provide a protective shield to defend customers from cyber attack") and lift those out of the legacy core. By extracting this intelligence out of the back-office and moving it into a mid-office layer that sits closer to the digital channels for customers, [banks can simplify](https://www.financedigest.com/rambus-bell-id-simplifies-tokenization-management-for-banks.html "Rambus Bell ID Simplifies Tokenization Management for Banks") complex operations and infrastructure and embrace intelligent technology to create the right service bundles for their customers. It will also allow them to understand how to leverage [customer data](https://www.financedigest.com/allianz-benelux-taps-into-modern-data-management-to-combat-fraud-and-foster-a-positive-customer-experience.html "Allianz Benelux Taps into Modern Data Management to Combat Fraud and Foster a Positive Customer Experience") to offer service-first models, just as the challenger banks do, and to stop looking at the legacy core system as a hindrance. Ultimately, banks must embrace a shift in mindset to adopt a more customer-centric, technology-driven [approach to deliver the hyper-personalised services](https://www.financedigest.com/how-insurers-should-approach-the-digitalisation-of-services.html "How insurers should approach the digitalisation of services ") that customers (especially younger customers) expect. If they don’t, their customers will continue to move to challenger banks and embrace their service-first [approach to meeting their financial](https://www.financedigest.com/how-financial-planning-starts-with-a-new-approach-to-budgeting-and-forecasting.html "How financial planning starts with a new approach to budgeting and forecasting") needs – leaving traditional banks behind. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---