Digital Banks - Canada

Canada

In Canada, the Digital Banks market market is expected to witness a significant growth in Net Interest Income.
It is projected to reach US$35.21bn by the year 2024.
Furthermore, the Net Interest Income in this market is anticipated to display a compound annual growth rate (CAGR 2024-2029) of -0.05%.
This will result in a market volume of US$35.13bn by the year 2029.
When compared globally, in China is expected to generate the highest Net Interest Income in the Digital Banks market market.
In the year 2024, in China is projected to generate a staggering amount of US$463.0bn in Net Interest Income.
Canada's digital banking sector is experiencing rapid growth and innovation, with new players entering the market and traditional banks expanding their digital offerings.

Key regions: Singapore, Germany, United Kingdom, South Korea, China

Definition:

Digital Banks refer to the emerging market for purely digital banks that offer financial services via online and mobile platforms. Unlike traditional banks, digital banks also known as neobanks, do not have store-based branches and instead rely on technology to deliver their services. But in contrast to digital-only direct banks, which focus on providing traditional banking services in an online format, the digital banks/neobanks covered in this analysis prioritize cutting-edge features and a modern user experience.
Digital Banks offer a wide range of financial products and services, including savings and checking accounts, credit cards, personal loans, and investment products, among others. They aim to provide a more convenient, accessible, and user-friendly banking experience by leveraging technology such as mobile apps and artificial intelligence. They also provide a digital identification and onboarding process, often via smartphone.
The Digital Banks market is growing rapidly as consumers increasingly demand more convenient, digitally focused financial services. Neobanks/Digital Banks are able to offer these services at a lower cost compared to traditional banks, as they have lower overhead costs and a more efficient operating model.
However, digital banks face challenges in building trust and establishing their reputation in the financial services industry. They must also navigate the complex regulatory landscape and comply with the same rules and standards as traditional banks.
Overall, the Digital Banks market represents a growing and exciting opportunity for financial services providers to deliver innovative and convenient solutions to consumers.

Structure:

The market data comprises Net Interest Income, the value of Deposits, the value of Loans, Credit Card Interest Income as well as the number of ATMs.

Additional information:

The Banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. Banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. Additionally, changes in regulations and the growing trend toward digitalization are shaping the retail and commercial banking market, creating opportunities for new entrants and forcing existing players to adapt.

Key players in this market are companies such as Bunq, Tomorrow, and Revolut.

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Analyst Opinion

The Digital Banks market in Canada is experiencing a significant growth trajectory, driven by shifting customer preferences towards convenient and efficient banking solutions.

Customer preferences: Canadian customers are increasingly gravitating towards digital banking due to its convenience, accessibility, and time-saving features. The younger demographic, in particular, is showing a strong inclination towards digital banking platforms, as they seek seamless and user-friendly interfaces for their financial transactions.

Trends in the market: One notable trend in the Canadian Digital Banks market is the emergence of innovative fintech companies offering specialized banking services tailored to specific customer needs. These digital banks are disrupting traditional banking models by providing personalized solutions, competitive interest rates, and advanced security features. Moreover, partnerships between traditional banks and fintech firms are on the rise, leading to a hybrid banking model that combines the stability of traditional banks with the agility of digital platforms.

Local special circumstances: In Canada, the vast geographical spread and diverse population present unique challenges and opportunities for digital banks. The need to cater to both urban and rural customers with varying banking requirements has spurred the development of versatile digital banking solutions. Additionally, regulatory frameworks in Canada are evolving to accommodate the growing digital banking sector, ensuring consumer protection and fostering innovation in the financial services industry.

Underlying macroeconomic factors: The robust economic stability and high smartphone penetration rate in Canada are supporting the growth of digital banks in the country. As more Canadians embrace online and mobile banking, digital banks are capitalizing on this trend by offering tailored products and services that meet the evolving needs of the tech-savvy population. Furthermore, the competitive landscape in the Canadian banking sector is driving traditional banks to invest in digital transformation initiatives to stay relevant and competitive in the market.

Methodology

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on Net Interest Income, Bank Account Penetration rate, the value of Deposits, the number of depositors, the value of Loans, the number of borrowers, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Modeling approach / Market size:

Market sizes are determined by a combined Top-Down and Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use data provided by the IMF, World Bank and the annual reports of the top 1000 Banks by asset size. Next we use relevant key market indicators and data from country-specific associations such as GDP, deposit interest rates, lending interest rates or bank account penetration rates. This data helps us to estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. For example, the S-curve function and exponential trend smoothing are well suited to forecast financial services for digital as well as traditional products and services.

Additional Notes:

The market is updated twice per year in case market dynamics change.