• A comparison of the profitability of digital banks has been conducted and the payback period assessed
• Current average time to become profitable is about 2 years for digital banks
• Digital banks are better positioned to provide financial services to customers during the pandemic

Customer acquisition is a top priority for digital banks in the early stages of development, and they turn their attention to becoming profitable as they mature. The operating environment for digital banks varies across different markets. While profitability remains a challenge for most digital banks, some digital banks in Australia, China, India, Japan and South Korea have reached profitability.

The aggregate net profit of the thirteen digital banks in Asia Pacific assessed increased by 49% to $1.66 billion in the financial year (FY) 2019 from $1.12 billion in the year before (Figure 1). This is largely driven by WeBank, MYbank, XWBank and aiBank in China. Among these thirteen digital banks, Tencent-backed WeBank posted the highest net profit of $565 million in FY2019, followed by ING Bank (Australia) and Alibaba-backed MYbank. Both WeBank and MYbank reported a full-year net profit for the first time in FY2016.

WeBank saw its net profit increase by 261% in FY2017, 71% in FY2018 and 60% in FY2019. It has leveraged Tencent’s ecosystem, technology capabilities and research and development (R&D) resources, which enabled it to scale up rapidly. In FY2019, investment into technology R&D accounted for almost 10% of its operating revenue, and about 60% of its employees are on the technology side. Leveraging Alipay’s artificial intelligence, computing and risk management technologies, MYbank has cooperated with over 400 financial institutions, serving 29 million small and micro businesses as of June 2020. The number of customers served went up by 70% in FY2019, and 80% of its loan users ...

Categories:

Keywords:Digital Banks, Customer Acquisition, Technology, Ai, Mobile Banking, Upi, Payments, Covid-19, Net Profit