The digital’s cost advantage

Interesting article by Bain & Company that analyzes various business variables between the new digital banks (based on cloud technologies) and traditional banks. Digital banks are no longer niche banks and they already have the potential to offer services on a large scale and with a very efficient cost structure: between 60% and 70% lower than that of traditional banks.

The article shows how new digital banks have demonstrated their ability to attract new customers, gain scale and market share, expanding their product portfolio and geographies, and becoming a real threat to traditional banks. The article provides some very revealing data on the advantages that these new digital banks would have over traditional banks in terms of:

• Efficiency and productivity: “A digital bank having a modern, cloud-native technology platform could have a cost base that is 60% to 70% lower than a traditional bank”, which would allow a customer-to-employee ratio of between 2 and 3 times higher than that of traditional banks.
• Customer experience: According to the article in a sample of European banks, it would take 36 clicks on average in a digital bank to open a current checking account compared to 85 clicks on average in traditional banks.