Usually, I have my blogs written in advance, or at the very least the subject predetermined. This time, I am deviating from my plans with a follow up to my last blog, Fintech – Let’s Build a Fintech Bank (see link below) with some updated information. In my last blog, I provided examples of digital-only banks in Europe and Mexico that are in their infancy. There are more digital banks opening worldwide, but the five digital banks that I cited each had an interesting background.
After my last blog, I received an email from a justifiably proud vendor about a client bank that had created a digital banking division, IncredibleBank (see link below). IncredibleBank does not operate under its own charter, but as a division of River Valley bank headquartered in Wausau, Wisconsin. Since it operates as a division of a bank, it is difficult to determine what its contribution is to the main bank’s bottom line. However, it has been in operation since 2009, so I assume that the contribution must be positive.
It appears that River Valley Bank has been able to succeed where Bank One failed with Wingspan Bank. It should be noted that there are nine years between the closure of Wingspan Bank and the opening of IncredibleBank. Nine internet years is significant. In 2000 there were ‘only’ 95.1 million internet users in the U.S. In 2010, there were 293.2 million internet users. Today in the U.S., there are 286.9 million users, or 88.5 percent of the population. Google was just a baby in 2000 having been just incorporated in September 1998. The first iPhone wasn’t announced until January 2007. If Wingspan Bank had been launched at the time that IncredibleBank was, it may still be operating today.
I think everyone agrees that digital banking has become an important delivery channel for all banks. However, there are still many questions: How disruptive will digital banking become? Is digital banking actually disruptive, or is digital banking just another step in branch transformation that began well over 40 years ago? It will take a few years for these questions to be answered. The potential is there, certainly for disruption.
The types of digital bank examples that I provided in my last blog aren’t apparent as a competition type in the U.S. Only three de novos have been chartered since 2010. Due to their scarcity, de novo applications are news today (there was one this past week). A digital de novo bank however, would be not just a news article, but it would make the headlines. So until that happens, focus on existing banks.
There is nothing to stop a neighboring bank, a regional bank, or a national bank from targeting your customers without actually having a physical presence. Any bank can do business anywhere using a robust smartphone app and an internet banking site. Surveying your competition used to be a simple matter, because there was a known set of banks to analyze. Today, a competitive analysis is not as easy. Literally, every bank has the potential to compete for your customers’ business. Eventually, a few of these more innovative banks will become your competition.