Neobank N26 Executive Predicts there will be As Many Digital Bank Accounts as Traditional Ones, but Global Fintech Reports Suggest Otherwise


Digital banks are on track to serve as many clients in Ireland as traditional banking service providers, according to N26, an all-digital challenger that recently secured $100 million in funding for its ongoing growth and development.

The German neobank reports double-digit growth in the Ireland market, which it attributes to the global and local impact of COVID-19 and the decline in cash transactions.

Sarunas Legeckas, head of N26’s Ireland division, predicted:

“I am confident that in five years there are going to be as many digital bank accounts as there are accounts in the incumbent banks.”

However, not everyone believes Fintechs will completely replace or even pose a competitive threat to incumbents.

For instance, Fintech platforms in Hong Kong are seen as an opportunity by incumbents, and not necessarily a threat to taking over their market share, a new report reveals.

The report was released by the Hong Kong Monetary Authority (HKMA) Market Research Division.

It noted that incumbents feel that there are major challenges associated with ensuring information security, data privacy and protection on Fintech platforms. Regulations and banks’ traditional IT systems will also have to be changed significantly before Fintech solutions can be completely integrated with all financial systems.

The report added that banks feel that their expertise and services will still be required in the coming years, and they expect to play a major role in responsibly supporting Fintech innovation and adoption. They argue that they can’t be displaced by new market entrants.

Another recent report from Fitch Ratings notes that Southeast Asian banks will most likely accelerate their digital transformation initiatives, due to the COVID-19 outbreak and changing consumer behavior resulting from safe distancing measures and lockdowns.

Incumbents could be challenged more than ever before, as they might struggle to offer the same level of customer services and competitive financial products as neobanks.

However, Fitch Ratings notes that it expects “established, digitally advanced incumbent banks” (and not necessarily Fintech startups) to “gain from the trend as customers flock to convenience and perceived safety in times of crisis, while also reaping the benefits from potentially improved productivity as well as cost savings from closed branches in the medium term.”

In a recent interview with Crowdfund Insider, Lex Sokolin, the Global Fintech Co-Head and CMO at ConsenSys, a leading Ethereum (ETH) development studio based in New York, argued:

“We are going to see even more convergence between the Fintechs and the incumbents within the next decade. Lots of things are going to be up for sale in this down cycle, and cash-rich traditional finance firms will be able to go on a shopping spree for discounted front-ends with million user footprints.”

He added:

“In the long run, there shouldn’t be much of a difference between a Goldman Sachs and a SoFi, or a Schwab and a Coinbase. Fintechs are not the thread or the disruptor — they are a repackaging of bank accounts, broker/dealer accounts, and payment rails that already exist. It is the large tech companies and crypto asset networks that I think will have lasting and potentially pivotal impact on the industry.” 

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