Digital banks are finding it difficult to generate profits, despite their increasing popularity. The primary issue is the low margins these banks operate on, due to the competitive nature of the industry and the pressure to keep fees low. The majority of digital banks are not yet profitable, with many focusing on customer acquisition and growth over immediate profitability.
Traditional banks, on the other hand, have a wider range of services and products that generate income, such as mortgages and credit cards. Digital banks are still finding their footing in these areas. Furthermore, the cost of acquiring customers for digital banks can be high, as they often rely on expensive marketing campaigns to attract new users.
To counter these challenges, some digital banks are exploring partnerships with traditional banks or seeking to become banking platforms themselves. Others are looking to expand their services to include wealth management or insurance products. Despite the difficulties, the potential for digital banks remains high, with some analysts predicting that they could eventually take a significant share of the banking market.
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