Digital Banks - India

India

In India, the Digital Banks market market is expected to witness a significant growth in terms of Net Interest Income.
It is projected to reach US$6.14bn in 2024.
Looking ahead, the Net Interest Income is anticipated to exhibit a Compound Annual Growth Rate (CAGR 2024-2028) of 2.36%, ultimately leading to a market volume of US$6.74bn by 2028.
When comparing globally, it is worth noting that in China will dominate in terms of generating Net Interest Income.
In 2024, in China is estimated to generate a substantial amount of US$969,200.0m.
India's digital banking sector is experiencing rapid growth, fueled by the country's large population and increasing smartphone penetration.

Key regions: United Kingdom, Japan, China, United States, Brazil

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 India is witnessing significant growth and transformation in recent years.

Customer preferences: Customers in India are increasingly gravitating towards digital banking solutions due to the convenience, accessibility, and efficiency they offer. The tech-savvy population in the country is embracing digital platforms for various financial transactions, leading to a surge in demand for digital banking services.

Trends in the market: One prominent trend in the Indian Digital Banks market is the rise of neobanks that operate solely online without any physical branches. These neobanks are leveraging technology to provide personalized services, seamless user experience, and innovative financial products to cater to the evolving needs of Indian consumers. Moreover, traditional banks are also digitalizing their operations and services to stay competitive in the market.

Local special circumstances: India's large population, increasing smartphone penetration, and government initiatives promoting digital payments are driving the growth of the Digital Banks market in the country. The demonetization drive in 2016 acted as a catalyst, pushing more Indians towards digital transactions and online banking services. Additionally, the growing middle class and young population in India are more inclined towards digital banking solutions, further fueling the market expansion.

Underlying macroeconomic factors: The regulatory environment in India is evolving to accommodate the changing dynamics of the Digital Banks market. Regulatory bodies are introducing measures to ensure the security of digital transactions, promote financial inclusion, and foster innovation in the fintech sector. Moreover, the increasing internet penetration, improving infrastructure, and rising disposable income levels are creating a conducive environment for the growth of digital banking services in India.

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.