July 4, 2020

How big can banks be?

The digital revolution has changed the course of traditional banking. Challenger banks are a phenomenon that have come up due to this digital revolution. These banks leverage technology to derive valuable insights from data and are giving head-to-head competition to incumbent banks.

Taking a look at the challenger banks, the banks with the most number of customers are part of the BRICS countries- China, Brazil and Russia. The biggest reason for this can be attributed to the sheer size of these countries. The five countries together, account for 40% of the world’s total population which allows these new players to have access to a larger market than banks in countries such as the UK and Germany. Apart from that, another reason for the number of customers is due to the fast-growing digital economies of these countries. Each of these countries is in a different stage of becoming digital-first, with China leading the way. This is further mirrored in the graph below, with WeBank surpassing all the digital banks in terms of the number of customers.

Today, Revolut has 10 million clients, Nubank 15 million, which is a fraction of Ant Financial, but not too far from some established institutions such as Deutsche Bank (30 million) or Societe Generale (31 million). With their objectives of scaling like tech companies rather than banks, this explains why the CEOs of Challenger Banks set their ambitions to hundreds of millions of users – which might seem far fetched today, but not unrealistic looking at Ant Financial and Webank.

And of course, comparing the 1.2bn users of Ant Financial vs. the 200m clients of Citi might seem unfair, if only because the definition of “user” or “client” is different, and the revenues and profitability per client is vastly different. However, this also highlights the difference in business models in the Internet era, where scale and low unit economics are at the foundations of the strategy of new entrants.


If you would like to learn more about the digital revolution that is taking traditional banking by storm, do check out CFTE’s FinTech Specialisation.  Learn from distinguished lecturers, such as Andrei Kirilenko, Director of the Centre for Global Finance and Technology at Imperial College London, and Janos Barberis, Founder of Supercharger FinTech Accelerator. From Mobile Banking, Blockchain to Cloud Computing, gain a competitive understanding of digital finance through 4 short online courses. Learn the right skills with CFTE to thrive in a digital world.

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