Can Digital Banks be Primary Banks?


As fintechs expand their core offerings towards becoming digital banks, the challenge of customer loyalty in a digital-only, non-customer facing environment becomes paramount.  With only a simple download and a few screen taps needed to switch banks - - how do these companies build a loyal community of primary customers?

Primary bank generally refers to the institution holding the bank account in which customers deposit their monthly paychecks and/or pay recurring bills from.   Clients tend to keep longer banking relationships and open more products and services with their primary bank (e.g. savings, credit cards and loans, or retirement and investments).  These ‘sticky’ financial service products ultimately make it less likely that customers will ever switch banks.  

Monese, a UK digital bank that started in 2015, has found a way to be both digital and primary.  The young company didn’t initially target tech-savvy millennials with their platform; instead they first focused on the thousands of migrants having to constantly move due to the region's migrant crisis.  This customer segment was having tremendous difficulty setting up accounts with traditional banks, which require physical addresses for primary residence and steady employment or balances to avoid fees.  Monese was able to offer accounts without these requirements and continuously spread their reach to multiple countries.

As a result of addressing this huge pain point, Monese’s customer base has greatly increased over the last 3 years and the amount of clients depositing paychecks is up to 70%.  Other competitors that offer similar products digitally do exist, but none have earned as much loyalty or recurring transaction activity from their customer base.  

As banking continues down a heavily digital path, large institutions and smaller companies looking to remain competitive should incorporate some of these critical learnings in differentiating what they offer.  Customer loyalty in all areas of business is increasingly hard to gain, but digital banks have a huge opportunity to earn all of a customer’s business by addressing their biggest financial needs first. 

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Image Credit - CNBC