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The banking system has been dominated by traditional banks for decades. Otherwise referred to as high street or legacy banks, these financial institutions generally have a physical presence. As technology has advanced, there has been a shift from legacy banking to modern banking that has a large or complete emphasis on digital services. Some traditional banks have incorporated this change by adding an online banking feature whilst newer companies take a wholly remote, digital-first approach, centred around smartphones and the internet. One notable example is Toronto-headquartered Black Banx.
Founded by German fintech billionaire Michael Gastauer in 2014, Black Banx has made a name for itself within the digital banking industry. Focused on financial inclusion, crypto, and every day banking services, Black Banx currently serves 28 million customers with a revenue of over $1.1bn, making it one of the world’s most popular digital banks. Other leaders in the industry include Revolut who recently hit 30 million customers and NuBank who recently recorded an astonishing 75 million customers, 70 million of those who reside in Brazil.
Being able to manage finances among other aspects of life at the click of a few buttons has enabled a large percentage of the population to embrace digital life. Brick and mortar banks have been around since the early 1900s as the number of people seeking somewhere to manage their funds continued to grow. Since then, the same selection of banks have typically dominated the industry, – per country. Traditional banks offer in person appointments, an aspect that has previously been a necessity. Cash deposits, withdrawals, advice, transfers and account openings were only available during in person visits for decades. The main difference between these institutions and digital banks, is that digital banks don’t have physical branches that customers are able to attend, instead, everything is done online.
Since the 2008 financial crisis and impact of the Covid-19 pandemic, customers have turned to digital banking as their trust in brick and mortar institutions wavers. In a world where the majority of services can be offered online, it’s no surprise that digital-first banking is becoming the norm. Without a physical presence, digital banks have lower overhead costs, and for companies like Black Banx it means providing customers with lower fees and competitive rates.
A report by Which? estimated that over 5,000 high street bank branches have closed down since January 2015, with approximately 54 closing a month. In comparison, Black Banx is onboarding 1.3 million new customers a month, an increase of 33% compared to December 2022. But these numbers and dwindling support hasn’t deterred the UK’s biggest building society, Nationwide. They have extended a pledge to not leave any town without a local branch for at least three years.
Nationwide chief executive Debbie Crosbie explained to the Independent that her bank was different, “We give customers a choice about how they do their banking and we support the British high street. Because our customers value face to face contact, and we’re owned by them, we act in their interests.”
However, as banks including Barclays and HSBC continue to close more branches, digital banking remains a threat to the likes of Nationwide. Digital bank accounts can be set up in minutes, and at Black Banx all that’s needed is a form of photo identification. Digital banks are also adding services that traditional banks aren’t interested in. One notable example is crypto. Cryptocurrency brings in a new demographic of users, and Black Banx has reaped the benefits of implementing the crypto exchange into their platform. Customers are able to have full control over their assets when banking with Gastauer’s financial service, with an added bonus of being able to pay third parties from the platform and withdraw funds into a cold wallet if needed.
With added features and easy accessibility, it’s easy to see why traditional banks are falling short against digital institutions, especially with the advancements in technology and mobile phone usage over the last decade.
