Neobanks (fully digital banks with no physical branches) will continue their growth story and reach a market share of over 25% (currently around 12%) within Austria’s banking business
This is a short version of the article ”5 predictions for the Austrian financial services market and its CEE footprint in light of the global Covid-19 pandemic” and focus on the 2nd of 5 predictions “Neobanks (fully digital banks with no physical branches) will continue their growth story and reach a market share of over 25% (currently around 12%) within Austria’s banking business”
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2020 was a rollercoaster for all of us, but “Life is a rollercoaster, you just gotta ride it!” Therefore I would like to invite you to have a look into the crystal ball, as it is important to position for the post-covid period.
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The entire article “5 predictions for the Austrian financial services market and its CEE footprint in light of the global Covid-19 pandemic” is available here.
Let’s have a look into the crystal ball
What will the Austrian financial services market look like in the next couple of years? And will today’s major Austrian financial players remain prominent in the future?
So far, the outbreak of Covid-19 truly showed that we are living in a volatile, uncertain, complex and ambiguous (VUCA) world.
What is known is that the global pandemic is acting as an accelerator for global trends:
- Demographic change: population growth, young vs. old countries, old vs. young generations, migration, urbanization, war for talent, etc.
- Digital transformation: data and analytics, automation, connectivity, omnichannel approaches, user and customer experience, accessibility anywhere / anytime, etc.
- Technology and innovation: exponential growth and agility of tech, artificial intelligence, security, adoption in ‘social service’ models, evolution of communication channels, blockchain, Open Banking, etc.
- Sustainability: scarcity of resources, ownership of responsibility, climate change, etc.
Beyond this, we know that it creates opportunities as well as disruptions.
Based on recent market developments and global trends, below are five predictions for how the Austrian financial services market will evolve over the next four to five years[1] and how those predictions are impacted by the global pandemic.
2nd of 5 predictions
Neobanks (fully digital banks with no physical branches) will continue their growth story and reach a market share of over 25% (currently around 12%[2]) within Austria’s banking business.
- Generation Z (born between 1995 and 2010) are digital natives and expect services to be accessible anywhere and anytime.
- Neobanks will connect with other ecosystem players to support seamless user and customer journeys.
- Funding rounds by venture capitalists will continue to boost the evolution of Neobanks, enabling new brands to become further established.
- Alongside traditional and new banking players, global technology companies will further expand their online business into banking services.
How is the prediction impacted by the global pandemic?
“Two out of every three people are using FinTechs”, EY stated in its recent Global Fintech Report, where they have consulted 27k consumers in 27 markets (published early February 2020). People are getting more familiar with using new products and services.
Covid-19 accelerated the world’s migration to a digital economy as the whole world had started to work remotely and companies were forced to cope with the new situation. At the same time, venture capitalists remained strong during the pandemic outbreak related to FinTechs. A recent research by MEDICI shows that Neobanks became one of the most funded sector, next to Lending, InsurTech, Payments and WealthTech. And according to Fincog, a new wave of Neobanks, specializing in niches and based on BaaS and open APIs infrastructure, is already on the way (e.g. STASH, rebanking or papara). A recent survey of BCG identified that during the pandemic in Austria, the usage of branches was reduced by 13%, while mobile Banking service usage increased by 19%. Besides that, global technology companies like Amazon and SaaS e-commerce enablers like Shopify continue to explore options on how to expand their revenue share — e.g. related to embedded finance, the seamless integration of financial services within the product offerings of non-financial businesses.
In short, the future remains dynamic. Make, Buy and/or Ally will continue to be the main drivers for the overall Austrian financial services industry.
Entire article
The entire article “5 predictions for the Austrian financial services market and its CEE footprint in light of the global Covid-19 pandemic” is available here.
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About
This is an updated version of the article “Five predictions for the Austrian financial services market and its CEE footprint”, which was initially authored by Tobias Schaller and published with Capco in February 2020.
Since summer 2020, Tobias acts as an independent trusted advisor via his own consultancy mosaikProjects.
The update provides insides based on latest available data and recent market activities and reflects the five predictions in light with the global Covid-19 pandemic throughout 2020.
References
[1] The predictions were initially authored by Tobias Schaller and published with Capco February 2020.
[2] mosaikProjects research 2020; considering direct banks from established players and new challenger banks that have already entered Austrian financial services market.
