Sponsored: Digital banks of the future - the challenges and choices

The future of digital banking is not about banking, it’s about helping customers meet their needs and desires - easily and seamlessly, says Deloitte’s Angela Robinson 

Incumbent banks face a disrupted landscape. Customer expectations are at an all-time high. The barriers to entry are dramatically reduced. New entrants are poised to disrupt and reshape the future of digital banking IF they can overcome the challenges of customer awareness, trust and cost of capital. And there’s an increasingly customer-focused regulatory environment.

The challenges

Digital and social experiences are redefining customer expectations. Customers increasingly expect intelligent, contextual services to be woven into their daily interactions. Our research shows that 53 per cent of customers believe that their digital experience with their financial providers still needs improvements  and the gap between a customer’s favourite brands and their primary bank is at least 12 per cent .

New entrants, including neobanks, tech giants and fintechs are changing the game by leveraging customer data, using the latest technology and lean business models to offer targeted services in a B2Me model. 58 per cent of Australians are already actively engaging with fintechs  and 14 per cent of customers have, or are in the process of, switching their main financial institution.

A newly customer focused regulatory landscape shaped by the 76 recommendations from the Hayne Royal Commission and with legislation including the Consumer Data Right, will continue to remove barriers for incumbents and new entrants to explore innovative new propositions. 

As expectations continue to evolve, it will be harder to be all things to all customers.

The choices 

For new entrants - our research shows that successful entrants will differentiate through an innovative suite of offerings developed to specifically appeal to a well-defined market. These new entrants benefit from lean business models and are unencumbered by legacy systems and processes, giving them the agility to rapidly iterate their offerings. However, they will need to quickly establish their customer base through a genuinely disruptive customer value proposition if they are to survive the inevitable competitive response from incumbents. 

Incumbent banks, in order to protect and even grow their market share, need to scale up their digital investments. Our experience and research indicates that they will have to make a choice between either launching their own digital banking offshoot, or embracing the broader ecosystem.

To think through the digital banking models we have identified four key choices:


As the focus shifts from providing banking products to targeted customer outcomes, we predict a move away from mass market and vertical integration.  

Digital and neobanks are focused on removing pain points in banking - such as approval times and fee levels - and providing new services, including spend management.

While neo-banks are at a nascent stage in Australia, a number of digital-only neobanks have already emerged over the past two years - Volt  and Xinja  have full ADI licences, graduating from their restricted Authorised Deposit-Taking Institution (RADI) licence status this year. 

Judo started as a lender to small business and received its full ADI licence in April 2019.  Neobank 86400, backed by payments company Cuscal, received its full ADI licence in July 2019. 

US neobank Douugh has partnered with mutual Regional Australia Bank , UK neobank Revolut started a beta version of its app in June 2019  and Chinese digital-only bank WeBank is reported to have plans to launch in Australia. 

Incumbent banks have also developed digital bank offerings: UBank (NAB), Up (Bendigo & Adelaide Bank), ING and ME Bank all offer digital stand alones services.  However unlike digital-only neobanks, digital bank offerings rely on existing bank infrastructure to deliver their services.

What’s Next?

1. Define your unique customer proposition
With open banking just around the corner, improved connectivity and data transparency coupled with a growing intent to switch, means that banks of the future must develop a clear point of difference. This is important both for organisations seeking to defend their existing customer base, and for those seeking to acquire new customers.

When considering where to play we consider six key questions: 

Understand your customer

1. What are customers unmet needs and desires? What is my clear and focussed value proposition?

2. When will customers prefer to maintain their relationship with traditional players? When will they be excited by new offerings?

3. What will drive customers to switch if at all – will it be price, service or both?

Understand yourself

4. What brand permission do we have? How much can we realistically change that? 

5. What capabilities do we have? What will we need to build to differentiation from traditional and new players? 

6. Will the new players in the future be competitors or partners?

Build in agility 

Be digital at the core, not just in the channel. Build a modern agile digital architecture that embraces open source technologies and allows full participation in the ecosystem. 

Successful digital banks need the ability to rapidly innovate and their launch to market will be critical to their success. Adoption of agile implementation techniques and real-time DevOps is an opportunity to profoundly impact operations by accelerating delivery, improving quality and constantly testing propositions with the customer.

Embrace the ecosystem

Embracing the FinTech revolution lies at the heart of a digital bank. Historically FinTechs have been viewed as a threat with incumbent banks developing their own competing offerings in house. 

However, more recently many banks have taken a more collaborative approach to working with FinTechs to launch faster and better offerings into the market. This partnership works in both directions, by supporting fintechs to reach more customers and supporting incumbents be more agile.

We are also seeing some incumbent banks beginning to partner with neos to leverage their superior technology offerings to enhance the experience of their own customers.  This most often occurs when the neo and incumbent are based in different geographies and aren’t an immediate competitive threat to each other. 


  1. Deloitte Digital report: Restoring trust in financial services in the digital era- Salesforce (2018)
  2. Deloitte Report: Accelerating Digital transformation in banking, (2018)
  3. Deloitte Digital report: Restoring trust in financial services in the digital era- Salesforce (2018)
  4. Volt was the first neo-bank to be granted a restricted Authorised Deposit-Taking Institution (RADI) licences in May 2018 and received a full ADI licence on 21 January 2019. See also: https://www.voltbank.com.au/about.html
  5. Xinja was granted a restricted Authorised Deposit-Taking Institution (RADI) licences in December 2018 and received a full ADI licence on 9 September 2019. 
  6. Smith, Paul, Neobank Douugh wants to take HENRYs from the big four after Regional Australia Bank deal, The Australian Financial Review, 28 Jan 2019.  
  7. Eyers, James, Neobank unicorn Revolut launches in Australia, The Australian Financial Review, 13 June 2019.  
  8. WeBank is 30 per cent owned by Chinese technology company Tencent. Frost, James, Chinese tech giant WeBank poised to disrupt Australian banking sector, The Australian Financial Review, 23 Jan 2019. 


Angela Robinson leads the national digital experience and technology teams for Deloitte Digital. As a Deloitte Partner specialising in Financial Services for the last 18 years she covers the end-to-end customer experience for the consumer, business and institutional bank.