The European banking and financial services industry has undergone significant change and innovation in recent years. With the emergence of fintech and increased competition, banks across Europe are having to adapt to remain relevant in a changing landscape. The sector continues to transform, from online and mobile banking to mergers and acquisitions. Here important facts you need to know about the best banks and financial institutions in Europe today.
The best online and mobile banking services in Europe
Online and mobile banking have become an integral part of everyday banking in Europe. According to a recent study, more than 60% of European bank customers regularly use online banking services. Adoption of online and mobile banking is particularly high in Nordic countries such as Finland, Denmark and Norway, where more than 90% of bank customers are active users of these digital services.
Many European banks have convenient mobile applications that allow customers to check balances, make transfers, pay bills and much more. Banks such as Revolut in the UK and N26 in Germany have found success by focusing on providing mobile banking services. Large traditional banks such as HSBC and Barclays have also invested heavily in their mobile apps and online banking platforms to meet changing customer needs.
The convenience and ease of online and mobile banking services is likely to continue to drive growth in their use in Europe. As technology improves, banks will need to focus on providing seamless omnichannel services and enhancing security to attract the attention of digital-first customers.
The Rise of Challenger Banks
In recent years, a plethora of challenger banks and neobanks have emerged in the European banking industry. These technology-driven startups provide digitally enabled banking services and challenge the dominance of traditional banks.
Prominent European challenger banks include N26 (Germany), Revolut (UK), Bunq (Netherlands), Monzo (UK) and Starling Bank (UK). They have attracted millions of customers across Europe, especially tech-savvy millennials, thanks to user-friendly apps, minimal fees and modern banking services.
Although challenger banks' share of the European banking market is still small, their continued growth and the threat of market disruption are pushing challenger banks to improve their own digital offerings. In the future, challenger banks will play a key role in driving financial innovation and healthy competition in the European banking sector.
Open Banking Initiatives
Open banking has become a major trend in Europe following the adoption of policy initiatives such as the revised EU Payment Services Directive (PSD2). It requires banks to open customer data via APIs to ensure it is securely shared with authorized third-party providers.
By promoting open banking, regulators aim to increase competition and innovation in the European banking sector. This will allow customers to access new types of financial services and applications offered by both traditional banks and fintech startups.
Many incumbent and challenger banks in Europe have already adopted open banking by developing APIs and partnering with fintech companies. Banks that embrace open banking can create opportunities to attract new customers, co-create products with partners, and generate additional revenue.
Consolidation of banks through mergers and acquisitions
In an environment of low interest rates, increased regulation and competition from fintech companies, many European banks are resorting to consolidation through mergers and acquisitions (M&A). Bank mergers help achieve economies of scale, reduce costs, diversify products and accelerate digital transformation.
Major European banking mergers in recent years include Caixabank's acquisition of Spanish bank Bankia, UBI Banca's takeover of Italian bank ISP and negotiations to merge Deutsche Bank and Commerzbank in Germany. Domestic bank mergers have been particularly popular as a way to gain domestic market share.
Cross-border banking M&A activity was more limited. However, deals such as BNP Paribas' takeover of Polish bank BGZ indicate that consolidation is taking place across Europe. As pressure on profitability continues, analysts expect more major bank mergers and acquisitions in the coming years.
The rise of sustainable finance and ESG investing
Sustainable finance and ESG investing (Environmental, Social and Governance) have become key priorities for European banks and financial institutions. Climate change concerns, regulatory pressures and customer demands are driving greater adoption of sustainable business models.
Many leading banks, such as ING, Santander and Barclays, have committed to aligning their lending and other practices with the Paris Agreement and the UN Sustainable Development Goals. Additionally, ESG-focused financial products are emerging in response to growing customer interest.
The EU has also introduced regulations such as the Sustainable Finance Disclosure Regulation to accelerate the growth of sustainable finance. The transition to sustainable banking and investment will continue to accelerate across Europe.
Partnership between fintech and banks
European fintech startups and traditional banks are increasingly seeking collaboration and partnership. Banks gain access to fintech innovations, and startups gain access to existing customer bases and infrastructure.
Partnerships in open banking, digital lending, payments, regtech and embedded finance are becoming more common. Many banks have acceleration programs and their own venture structures to interact with fintech companies. Some banks, such as BBVA and Santander, have also made direct acquisitions of fintech companies.
As competition between open banking and big tech intensifies, partnerships between banks and fintech companies will play a critical role in driving innovation and improving the customer experience. This “cooperation” could potentially change Europe's financial services ecosystem.
Increasing adoption of digital currencies
Cryptocurrencies and digital money are becoming increasingly widespread in Europe. According to the study, more than 50 million Europeans currently own cryptocurrencies such as Bitcoin. Leading European banks such as UBS, Santander and Deutsche Bank are also exploring cryptocurrencies and blockchain technologies.
At the same time, central bank digital currencies (CBDs) are attracting increasing attention. The European Central Bank is actively exploring the possibility of using the digital euro as legal tender within the EU. Pilot projects to create CDV are also being implemented in countries such as Sweden, France and Switzerland.
As customer interest and technological capabilities grow, digital currencies could have an impact on European banking and financial systems in the long term.
The evolution of banking technologies and their impact on consumers
Banking technology has undergone rapid evolution in recent decades, fundamentally changing the way consumers interact with financial institutions. From the advent of online banking in the 1990s to the explosion of fintech innovation, banks have adopted new technologies to meet changing consumer needs and behavior.
The origins of Internet banking
Internet banking first appeared in the 1980s and 1990s with the advent of the Internet and smartphones. In its early days, online banking allowed customers to check balances, view statements, and perform basic transactions on desktop computers. Their adoption was slow at first, but growth accelerated in the late 1990s.
The launch of internet banking has revolutionized accessibility, allowing consumers to bank anytime, anywhere. Online banking has reduced branch traffic and bank operating costs. Features such as paying bills, opening accounts, and applying for credit have also become available online over time.
Revolution in mobile banking
The advent of smartphones in the 2000s led to the proliferation of mobile banking applications. New technologies have enabled banks to provide services through consumers' mobile devices. Early SMS and text banking services were eventually replaced by downloadable apps.
Mobile banking provides maximum convenience and accessibility. Key features include remote check deposits, peer-to-peer payments, budgeting tools, credit history monitoring and more. Biometric login, such as fingerprint scanning, also improves security. Mobile banking is now the preferred banking channel for many consumers around the world.
The emergence of neobanks
Neobanks, or challenger banks, have been disruptive for the industry in recent years. These digital-only banks use technology to provide modern banking services without physical branches. Many banks, such as Monzo and N26, offer convenient mobile apps, digital account opening, no foreign transaction fees and real-time notifications.
Millennials and Gen Z are drawn to the convenience and technological advantages of neobanks. Despite relatively low adoption rates, neobanks have forced incumbent banks to up their digital game. They have helped redefine consumer expectations for banking in the digital age.
The Open Banking Revolution
Open banking rules, such as PSD2 in Europe, help improve financial transparency. The rules require banks to open customer data through an API, which allows it to be transferred securely to third parties with the customer's consent.
This allows consumers to access innovative new services from fintech companies and gives them more control over their data. Open banking also promotes competition in the industry. Consumers can benefit from more personalized offers as banks use open data.
The emergence of digital currencies
In recent years, the popularity of cryptocurrencies such as Bitcoin and Ethereum has increased dramatically. Although the industry is still in its infancy, millions of people already own or trade digital currencies. Some non-banks even allow customers to buy and sell cryptocurrencies.
Central bank digital currencies (CBDCs) are also on the rise. Central banks are currently exploring the possibility of issuing digital fiat money. Widespread adoption could lead to programmable money embedded in smart contracts.
AI and automation
Banks are using artificial intelligence and automation to improve the quality of service. Chatbots now handle basic customer queries. Robotic process automation speeds up internal processes such as loan approvals. AI helps detect fraud and enables hyper-personalized marketing.
As technology advances, consumers may interact less and less with representatives of human professions. However, most consumers still expect human interaction in solving complex banking problems. Maintaining this balance will play a key role in the process of further automation of banks.
The future of banking technology
In the future, the banking industry will likely see widespread use of biometrics, the Internet of Things, quantum computing and other new technologies. Although there are security and privacy risks, technology will continue to reimagine banking with an emphasis on immediacy, personalization and automation.
Banks must continue to adapt to how consumers use technology. Although the future is uncertain, banks that leverage technology and put the customer first will continue to have an advantage.
How digital banking is helping to expand financial inclusion for the poor
Financial inclusion remains a major challenge around the world: 1.7 billion adults worldwide are unbanked, according to the World Bank. However, innovations in digital banking are gradually helping underserved populations gain access to the formal financial system, overcoming traditional barriers.
Reaching non-bank clients
Digital banks create basic accounts with little or no balance. The M-Pesa mobile money service has given millions of people in Kenya and Tanzania access to payments, savings and credit. The ease of opening accounts using smartphones helps expand access.
Digital banking also makes international money transfers more accessible. Fintech companies like TransferWise enable migrant workers and families to transfer money across borders more cost-effectively.
Serving low-income clients
Digital banking services can help traditionally underserved populations, such as low-income households, rural communities, guest workers and micro-businesses. Features such as online lending, peer-to-peer payments and budgeting tools provide tailored solutions for low-income communities.
For example, neobanks such as Monzo and Revolut offer one-time use virtual debit cards that allow you to better control your spending. Cryptocurrency applications also make money transfers faster and cheaper for migrant workers.
Overcoming access barriers
By removing geographic barriers, digital banks are opening up access to banking services to rural unbanked households. Digital banks also reduce dependence on physical branches and ATMs, which are in short supply in remote areas. Biometric login apps eliminate paper barriers for those without official ID.
Fintech companies like LendingClub and PayPal provide alternative credit scoring models using non-traditional data, such as rental history. This expands access to credit for unbanked consumers with limited formal credit histories.
Promoting financial inclusion for women
Digital banking can also help expand financial inclusion for women, who face unique barriers. Digital lending and savings apps such as Tala and Chipper Cash are designed to meet the financial needs of women in developing countries.
Digital banks give women greater control over their finances, provide greater anonymity and security, and are less reliant on physical branches. Fintech companies such as Ellevest and SALT also provide financial services specifically designed for women.
Policies to promote financial inclusion
Governments and policymakers are promoting financial inclusion programs, such as the World Bank's goals for universal financial access. Support for digital ID, data privacy and fintech licensing regulations enables accessible digital banking models.
Many regulators are now allowing non-traditional players such as mobile operators and fintech companies to provide banking services. Public-private partnerships, innovation labs, and sandbox modes also facilitate comprehensive testing of fintech.
There are still significant barriers to financial inclusion. Limited digital literacy and low smartphone penetration continue to hamper the penetration of financial services in developing countries. Affordability challenges remain as underserved segments remain tariff sensitive.
We need to improve the interaction between bank accounts and mobile wallets. Strict KYC requirements also still exclude parts of the informal economy. Continued innovation in digital banking and supportive policies are critical to further progress.
How digital banking services are transforming the customer experience
Digital banking has radically changed the banking experience of customers around the world. New technologies have enabled banks to provide seamless, personalized and value-added services across all channels. Customer experience has become a key competitive advantage.
Effortless digital registration
Opening an account at a traditional bank often requires paperwork, branch visits, and waiting. Digital onboarding with eKYC and video verification allows customers to conveniently open accounts online or via mobile in minutes.
Non-banks such as N26 and Revolut offer almost instant digital account opening. Major banks such as HSBC have also introduced digital account opening technologies with biometric verification to ensure a seamless user experience.
Leading banks are now integrating services across the web, mobile devices, call centers, ATMs and branches. Customers can start their loan application online and complete it at the branch. Or receive personalized offers via mobile that direct them to an ATM.
Omnichannel banking provides continuity and flexibility. Banks like Capital One allow customers to seamlessly switch between channels depending on the context and preferences of a particular interaction.
Advanced data analytics allows banks to hyper-personalize offerings and experiences. Customers receive location-based promotions, product recommendations based on spending patterns, and alerts about unusual account activity.
Banks can also integrate third-party applications and services into their platforms using APIs. This allows you to create specialized applications such as budgeting applications, rewards programs, etc.
By receiving information in real time, banks can take a proactive approach to working with clients. If the upcoming payment on the account does not go through, the bank can warn the client about this and offer him a microloan. If a client has not used a particular service for a long time, the bank can give him a useful reminder.
Tools like chatbots also provide convenient and helpful customer interactions. The bank can play a proactive role in the client's financial life, beyond just transactions.
Seamless digital commerce
Today, banks provide seamless e-commerce and e-commerce payments. Customers can securely place and pay for purchases on merchants' websites and apps using bank cards or wallets.
Banks are also integrating loyalty programs and card-linked offers to provide additional benefits. Digital banking services enable you to complete the entire commerce journey from discovery to purchase and payment from anywhere, anytime.
Looking into the future
In the future, banks will need to provide increasingly personalized and contextual experiences across digital touchpoints. Technologies such as AI, ML and biometrics will enable more proactive and streamlined interactions.
While digital self-service channels will expand, human interaction will remain vital to solving complex financial problems. Hybrid models that combine physical and digital capabilities will be key.
As customer expectations rise, banks that provide an omnichannel, data-driven and seamless experience will have an advantage. In the era of open banking, customer experience will become the main area of competition.
How will big data and analytics transform banking?
Big data and analytics play a critical role in the digital transformation of the banking industry. Using huge amounts of data and new analytics methods, banks gain strategic insights, automate processes and personalize offers.
Risk management and fraud detection
To improve the efficiency of risk management, banks use predictive analytics based on structured and unstructured data coming from various systems. By analyzing past fraud patterns and customer behavior, banks can proactively identify suspicious activity.
Machine learning algorithms can also automatically detect fraud during transactions in real time. This reduces losses and increases customer safety. Analytics also helps reduce risk and meet regulatory requirements.
Customer data, including demographics, transactions, online behavior, and more, provides insight into customer needs. Analytics techniques such as clustering allow banks to micro-segment customers and tailor products.
Real-time analytics even allow you to personalize your customer experience. Banks can provide contextual recommendations and offers based on customer data to increase engagement and sales.
Banks use analytics techniques such as natural language processing to understand unstructured data such as customer emails, call transcripts and legal contracts. Artificial intelligence bots are trained on this data to automate customer service, contract analysis and other processes.
Direct data processing based on analytics allows you to automate internal functions - from issuing loans to capital management. This increases efficiency and reduces costs.
Data-driven decision making
Analytics help identify growth opportunities and make strategic decisions. Banks analyze market trends, customer behavior, product characteristics and operational data to inform initiatives for new products, pricing, campaigns, etc.
Dashboards give managers real-time business insights for data-driven management. Predictive analytics also supports scenario planning and forecasting to make smarter decisions.
The potential of open banking
Open banking expands the amount of customer data available to banks through APIs. With consent, banks can analyze the external financial data of other organizations to obtain deeper information.
Analytics reveal the potential value of open banking data. However, privacy concerns require responsible data management. Analytics, combined with strong data management and security controls, can help banks use open banking data to deliver personalized services, improve risk management and drive innovation.
In the era of open banking, customer experience will become the main area of competition. Banks that can use big data and analytics to create personalized offers and deliver exceptional customer experiences will gain a significant competitive advantage. By analyzing customer data and understanding their needs and preferences, banks will be able to tailor their products and services to individual requirements, increasing customer satisfaction and loyalty.
Risk management and fraud detection
Big data and analytics play a critical role in risk management and fraud detection in banks. By analyzing customer fraud patterns and past behavior, banks can proactively identify suspicious activity and take preventive measures. Machine learning algorithms can also detect fraud during transactions in real time, reducing losses and increasing customer safety. Analytics also supports risk management and compliance by providing information about potential risks and helping banks achieve regulatory compliance.
Customer data allows you to obtain comprehensive information about customer needs and preferences. Using analysis techniques such as clustering, banks can micro-segment customers and tailor products and services to their specific requirements. Real-time analytics can even personalize the customer experience by providing contextual recommendations and suggestions based on customer data, which increases engagement and sales.
Analytics such as natural language processing enable banks to understand unstructured data such as customer emails and call transcripts. This data can be used to train artificial intelligence bots, allowing you to automate customer service, contract analysis and other processes. Direct data processing based on analytics allows you to automate internal functions, increasing efficiency and reducing costs.
Data-driven decision making
Analytics allows banks to gain valuable insights to make informed decisions. By analyzing market trends, customer behavior, product characteristics and operational data, banks can identify growth opportunities and make strategic decisions. Real-time dashboards give executives insight into the business, supporting data-driven management. Predictive analytics also supports scenario planning and forecasting, allowing you to make more informed decisions.
The potential of open banking
Open banking allows banks to access external financial data from other organizations through APIs. By analyzing this data, banks can gain deeper insight into customer behavior and preferences. However, responsible data management is necessary to address privacy concerns. Analytics, combined with strong data management and security measures, can help banks harness the potential value of open banking data while ensuring the privacy and protection of customer data.
Big data and analytics are thus transforming banking by providing personalised experiences, improving risk management, automating processes and facilitating data-driven decision-making.