A significant disruption to the financial landscape is likely to come from the big tech firms, who will use their enormous customer bases and deep pockets to offer financial products based on big data and artificial intelligence.”
— Christine Lagarde
IMF Managing Director
In June 2019, International Monetary Fund Managing Director Christine Lagarde presciently warned that the growing presence of tech players leveraging big data and artificial intelligence technology could significantly disrupt the world’s financial system.
There is no question that the accelerating developments of financial technology applications — popularly known as “fintech” — have had a major impact on the banking sector, spurring the rise of challenger or neobanks, notably Apple and Chime:
- Apple – In August 2019, Apple launched its Apple Card credit card, which provides 1% cashback on physical card purchases, 2% on Apple Pay purchases, and 3% on purchases from Apple, with cashback credited every day. And there are no late, annual, international or over-limit fees. The sign-up process is effortless and takes less than five minutes. Apple Card arrives in about five days, handsomely packaged in a white cardboard folder. Apple also offers a payment system, Apple Pay, and an Apple Savings account.
- Chime – Chime is largest U.S. challenger bank with 22 million customers. In December 2019, Chime raised $500 million, valuing the startup at $5.8 billion. Today, it’s worth in excess of $25 billion.
Banking customers have become enamored with electronic banking, particularly during the Covid-19 pandemic, when lockdowns and social distancing accelerated the adoption of digital banking. This shift has led to a permanent change in banking habits, with more people opting for digital solutions.
Uptake has been dramatic, particularly in mobile banking. In 2023, 48% of U.S. consumers primarily used mobile banking to access their accounts, a significant increase from 15% in 2017.
Electronic banking encompasses many services, allowing customers to conduct online financial transactions. These services include online account management, fund transfers, bill payments, loan applications, and investment activities. Several key factors have driven the adoption of e-banking:
- Technological advancements – Rapid technology developments, particularly more powerful mobile devices, high-speed internet, and secure online platforms, have made electronic banking more accessible and user-friendly. Improved encryption and cybersecurity measures have also bolstered consumer confidence in digital banking services.
- Convenience – Electronic banking offers unparalleled convenience, allowing customers to access their accounts and perform transactions anytime, anywhere. This 24/7 availability eliminates the need for physical visits to bank branches, and saves time and effort.
- Cost efficiency – For banks, electronic banking reduces the operational costs associated with maintaining physical branches and handling paper-based transactions. These savings can be passed on to customers through lower fees and better interest rates.
Today’s consumers expect seamless and instant access to financial services. The growing reliance on smartphones and other finance apps has fueled demand for mobile banking that meets heightened expectations.
The benefits of electronic banking are manifold. For customers, it means greater control over their finances, the ability to monitor real-time transactions and access to a wider range of financial products and services. This empowerment is particularly evident among millennials, with 74% preferring digital banking, the highest uptake among generations. Approximately 60% of consumers reported using a digital wallet like Apple Pay at least once in the past month.
However, the rise of electronic banking also brings challenges. Cybersecurity threats are constantly concerning, requiring continuous investment in advanced security measures. Additionally, the digital divide means that not all customers have equal access to these services, potentially leaving some populations underserved.
Looking ahead, the future of electronic banking appears promising. Integrating such technologies as blockchain, biometrics, and open banking APIs will further enhance banking services’ security, transparency, and interoperability. The trend toward digital banking is expected to continue, driven by technological advancements and evolving consumer preferences.
Ubertrend: Digital Lifestyle