While traditional banks still dominate global banking, digital banks have been growing rapidly. A 2019 Accenture report found digital-only banks in the the UK were set to triple their customer base from 13 million to 35 million in 12 months, accelerating customer acquisition at a growth rate of 170 per cent as they launch new products, widen their customer base beyond millennials and expand into new markets.
Alongside, the global market size of neo and challenger banks is also gaining momentum, estimated at nearly $35 billion in 2020 and predicted to reach $722.60 billion by 2028.
Scale holds key to profitability
Even as new digital-only business models show great promise, the harsh reality is that the majority are not yet profitable and a long way from winning enough trust to convince customers to switch to using them as their primary bank with larger balances. The path to long-term profitability still needs scale and expanding across borders is no mean feat.
For neobanks, overcoming barriers to entry and the strong reach of traditional banks make it difficult to start from scratch in a new market, particularly in an overbanked region such as the GCC. Ambitious digital-only financial start-ups aiming to expand in the Middle East and Africa often find themselves overwhelmed by the intricacies of regulations and access to resources such as infrastructure and security.
Chasing success
For new business models to succeed, it’s important to understand that it’s not just about using technology to replace legacy systems with more convenience, improved user experience and better rates in comparison to conventional banks. To strengthen their presence also requires finding the right partners to help navigate the complexity of the local payments ecosystem.
A partnership approach is exactly how South Africa’s leading digital-only TymeBank enabled small and micro businesses to accept card payments in 2020. Following their successful entry into the South African consumer banking market in partnership with Network International, TymeBank now also has plans to build accessible and affordable payment solutions for the small and micro businesses market.
Unit economics
Digital banks value that we share their burden of regulatory adherence through our platforms that are fully compliant with more jurisdictions in the Middle East and Africa than any other payment partner. That, and our platforms are robust, scalable, cost-effective, and enable our clients to stay focused on developing products and services.
Otherwise, with their own overheads and limitations, new-age banks may struggle to scale fast enough as traditional banks race to update their legacy systems too. According to Juniper Research, it's expected that almost 53 per cent of the global population will access digital banking by 2026.
So, to digital banks that want to get ahead quick and expand their presence in the Middle East and Africa, I say: if you've got the ambition, we've got the infrastructure.
