Is digital transformation a survival strategy for banks today? Retail banks in the United States are investing heavily in new technologies and staff as a part of a larger push for digital initiatives. US banking digital transformation spending is estimated to grow at an annual rate of 22.5% by 2020, with most of the established banks allocating nearly 40% of their IT budget to meet the goals of this digital transformation.

Modern banking is a far cry from the long queues and the headache-inducing paperwork of the past; the entire bank is available today through a couple taps on a smartphone – a study of US banking customers found that 56%[1] prefer more of a digital than a personal relationship with their bank. Among millennials, the number is even higher – 70% [2]prefer to interact with their banks online.

Incumbent banks are now responding to this shift in consumer behavior by forming a separate digital-only bank[3], where all the banking services are delivered through mobile devices and the web.

Operating banks with zero branches place digital-only banks on the upper end when it comes to offering better deals to customers/creating a customer experience which is uniquely differentiated; physical branches cost banks $4 per transaction on an average, while PC and mobile banking cost $0.09 and $0.019 per transaction respectively.

DBS Bank, for example, in 2017, has launched its digital-only bank called digibank by DBS (digibank)[4] in Indonesia (following the successful rollout of digibank in India in April 2016, which has enabled DBS to penetrate India’s retail banking market with about 1.5 million new customers acquired by August 2017). The bank claimed to have the

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