Pitfalls, challenges in the digital banking industry

Meanwhile, Justin Ong, Deloitte Malaysia’s innovation and regulatory leader says that from as early as 2013, Europe was leading in terms of digital banks or “challenger banks”.

WHILE digital banking seems like an exciting venture, it is a challenging business and there is no certainty that any licence holder will make a profitable venture out of it.

As one global consulting firm points out, among the pitfalls of digital banks include those that had set too high customer acquisition costs and those which based their selling proposition on lower rates than traditional banks. The firm points out that going down those routes will prove unsustainable in the long run.

Other pitfalls include insufficient access to funding and depending solely on the wholesale markets. Lastly, there are also cases where new digital banks have spent too much on building technology and a failure to use commercially available technologies.

This had resulted in too high costs, the global consulting firm tells StarBizWeek.