The global digital banking platform market size was valued at USD 5120 million in 2021 and is projected to reach USD 16390 million by 2030, registering a CAGR of 13.8% during the forecast period (2022 - 2030)
With the help of a digital banking platform, banks can provide their clients with a digitized banking experience that includes all standard banking services, including online and mobile banking. Additionally, it offers several banking features like bill payment, money transfers, bill deposits, money withdrawals, savings account management, financial product applications, and loan management. Additionally, it offers its end users multichannel and omnichannel banking services. Additionally, many banks utilize this platform to reduce human error and finish challenging tasks more quickly and effectively. Further, many banks and financial institutions are creating cutting-edge, intelligent banking platforms to cut costs and boost account security. The main factors driving the market's expansion are an increase in internet users and a shift away from traditional banking toward online banking. The market is growing due to more people using cloud platforms, which improves scalability.
Due to the expansion of mobile apps and internet usage worldwide, the customer base for online banking is growing. Additionally, these online banks can manage sizable customer databases with less space and staffing needs. Consumers now prefer to manage their bank accounts using smartphones because they find it a convenient and quick way of handling accounts, which is a significant driver given the increased usage of mobile internet in this day and age. Customers have switched from traditional banking to new and advanced online banking methods due to the enhancements made to bank websites and mobile banking applications, making them more interactive and user-friendly.
Online banking has grown significantly in recent years due to the increasing use of smartphones and the internet globally. Due to the instant accessibility and affordability of the applications, digital banking is regarded as one of the most practical and frequently used options for customers. In recent years, many companies and individuals have begun submitting loan applications online rather than going through lengthy lending. Federal Reserve reports that in 2018, 24% of small businesses in the U.S. applied for loans online, a significant increase from the 21% in 2017. Additionally, the banking industry has benefited from digitization by providing better services and increasing profits, which has caused financial institutions to focus more on digital banking and increased market growth.
Financial institutions all over the world strive to ensure secure transactions and to make compliance easier. As a result, numerous strict regulations have been introduced, including Know Your Customer (KYC) and new tax reporting regulations under the Foreign Account Tax Compliance Act (FATCA). The amount of compliance work required of banks, asset management firms, brokers, and insurers has increased due to these regulations. This rise in new rules has increased the need for transparency of banks and financial regulators with customers or end users about the trade-off between convenience and security regarding digital banking functions. Also, highly sophisticated cyber-attacks have exacerbated the decision of many financial institutions to deploy third-party technological solutions for mobile or web applications. For instance, the Equifax data breach caused a significant data loss for more than 145 million people in the U.K., the U.S., and Canada in 2017.
This Equifax incident was considered a wake-up call to ensure compliance and data security measures in the digital lending space. The need for digital banking among individuals has led to a rise in the number of sophisticated cyber threats where phishing scams, fraudulent behaviors, and malware are improvising with increasing attempts. To overcome these challenges, an increase in demand for automation and artificial intelligence (AI) security tools by regulators and financial institutions has been witnessed in recent years.
Data growth has opened up numerous opportunities for lenders in recent years to integrate data-driven insights to improve the effectiveness of customer acquisition, servicing, credit risk management, and collections. The ongoing trend of cloud platforms has become prominent in digital banking and is essential in providing various banking services. These cloud-based solutions have transformed the banking sector with new perspectives and solutions. Several organizations are now moving to the cloud applications for streamlining the storage of data, as it provides remote server access on the internet, thus, enabling access to infinite computing power. Moreover, implementing a cloud-based model allows organizations to manage all the applications simultaneously, as there is no invisibility with exceptionally challenging analytics functioning in the background. Furthermore, implementing cloud-based banking solutions enables organizations to integrate supplementary infrastructure technologies to create robust and highly secure platforms. This rising trend of cloud-based services is projected to provide lucrative opportunities for the digital banking platform market, owing to the growth in demand for these digital platforms coupled with cloud technologies.
The global digital banking platform market is segmented by component, deployment model, type, banking mode, and region.
By component, the global digital banking platform market is bifurcated into solutions and services. The solution segment accounted for the largest market share and is estimated to grow at a CAGR of 13% during the forecast period. An increase in focus on customer acquisition among bankers, a rise in investment in solutions for faster loan processing, and management of established communication between bank professionals &customers fuel the growth of the market. Furthermore, lenders are shifting their focus toward a better experience for borrowers and operational and cost-effective solutions for rapid loan approvals. In addition, the major factors that boost the digital banking platform market growth include extensive use of emerging technologies such as predictive analysis and others. Moreover, the need for online banking solutions among developing economies, owing to rising FinTech investments, is expected to drive market growth in the near future.
The services segment is the second largest. As support services help deploy and integrate distinct digital banking solutions in an enterprise ecosystem, they work as a support system for any organization. They play a vital role in digital banking, meeting client requirements, including reduced documentation and rapid loan process. An increase has been witnessed in the adoption of services among end users, as they ensure the effective functioning of platforms throughout the loan management process. Thus, adopting digital banking platforms is expected to boost the demand for these services. These lenders need management consultants and their services, which help them retain their borrowers, thereby driving the adoption of digital banking consulting services.
In terms of deployment model, the global digital banking platform market is bifurcated into on-premise and cloud. The on-premise segment accounted for the largest market share and is predicted to grow at a CAGR of 12.6% during the forecast period. On-premise-based platforms are known for better maintenance of servers, and a continuous system facilitates the implementation of these digital banking platforms. Banks can offer their customers a digitalized banking experience that includes all standard banking services, such as online and mobile banking, with the aid of a digital banking platform. It also provides a range of banking features, including the ability to pay bills, transfer, deposit, withdraw, manage savings accounts, apply for financial products, and manage loans.
Additionally, it provides omnichannel and multichannel banking services to its customers. Many banks also use this platform to decrease human error and complete problematic tasks more efficiently and quickly. Many banks and financial institutions are also developing cutting-edge, intelligent banking platforms to reduce costs and improve account security. The main factors driving the market's expansion are an increase in internet users and a shift away from traditional banking toward online banking. The market is growing due to more people using cloud platforms, which promotes greater scalability.
In terms of type, the global digital banking platform market is divided into retail banking and corporate banking. The retail banking segment was the highest contributor to the market and is estimated to grow at a CAGR of 14.4% during the forecast period. The retail banking sector is expanding at the fastest rate, as consumers put more of an emphasis on managing their finances and look to digital tools for guidance and insight. Banks have also realized that Fintech is not a threat to the consumers but rather an opportunity. New opportunities for profitability in deposit, banking, and wealth accounts are expected to emerge due to rising interest rates and inflation. Additionally, companies that can quickly launch new products to draw in new customers and drive rapid customer acquisition are in the best position to increase revenue and profit in this new online banking environment.
As per banking mode, the market is segmented into online and mobile banking. The online banking segment was the highest contributor to the market and is estimated to grow at a CAGR of 12.7% during the forecast period. Online banking is often confused with mobile banking, net banking, and omnichannel banking. Although this type of banking does consist of the processes mentioned above, it involves crowdfunding, real-time, peer-to-peer, cryptocurrency, IT support, and financial platforms, which online banking vendors provide to various banks. Furthermore, the increase in preference for digitization & automation, the rise of Fintech, which is computer programs, and financial services supported by technology drive the market growth. In addition, regulatory initiatives have encouraged all financial institutions to become more transparent and minimize the risk of hacking & misuse of user information.
Region-wise, the global digital banking platform market is analyzed across North America, Asia-Pacific, Europe, and LAMEA.
North America was the highest revenue contributor and is estimated to grow a CAGR of 12.7%. The countries in North America have digitally transformed the end-to-end credit journeys, which has contributed significantly to delivering an exclusively personalized and intuitive banking experience. With innovations and technological advancements in financial services, such as digital lending, it is evident that countries such as the U.S. are already gaining high revenue benefits. Furthermore, advances in information technology causing increased development of interactive and consumer-friendly user interfaces of the websites and applications have led to a change in consumers' preference for banking services. It is the most advanced online banking consumer base, fueled by the presence of major global players and a high youth population with high product awareness. This region is expected to continue to hold a prominent share in the global market in the future.
Europe is the second largest region. It is projected to reach USD 5175 million by 2030, registering a CAGR of 13.1% during the forecast period. European FinTech has witnessed increasing adoption of accurate data-driven, model-based decision-making systems to continuously improve criteria and covenants for contracting and disbursement and have adopted the automated digital process. Moreover, smartphone-addicted European consumers have adopted mobile banking with the increased usage of payment via apps, thus driving market growth. The surge in internet penetration and the presence of a significant percentage of youth using mobile and online banking systems are expected to fuel the growth.
Asia-Pacific is the third largest region. A large consumer base using digital banking regularly, with a significant portion in fast-growing countries, such as China and India, and rapid growth in internet penetration through desktops, smartphones, and tablets boost the market growth. The convenience offered to consumers by using digital banking further fuels the market. Furthermore, favorable government initiatives to support start-ups have paved the way for many small and medium-sized businesses, creating a high number of retail and corporate accounts in more than 33% of Asia-Pacific banks. Banks and Fintech in this region are witnessing increased adoption of advanced analytics technologies such as machine learning and artificial intelligence to help identify qualified customers for secured and unsecured digital banking platforms. For example, Caribbean Mercantile Bank N.V. has developed a fully digitized SME services platform to offer a streamlined loan application process. Also, in 2018, CMB’s NPL registered a ratio of 1.36 % compared to an average of 1.8 % for China.
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