Everyone talks about what neobanks have that traditional banks don't. But few talk about the "assets" that traditional banks have that neobanks dream of. Assets that, if used correctly, become strategic advantages in the race for digital sales.
Make no mistake; digital sales are the new battleground in financial services. Both neobanks and incumbents are chasing the same customer wallets, and they chase them digitally. One could say that this is because of customer convenience, but reality is it not only that. Neobanks do so because they do not have any other way.
Traditional financial institutions chase them digitally because this drives operational efficiency, scale and cost reduction. Serving customers through digital funnels is dramatically cheaper than through branches, and every percentage point lift in conversion flows straight to the bottom line. And it is in this race that traditional financial institutions have advantages that are hard to replicate overnight.
Neobanks have mastered sleek design and growth hacking, but legacy banks sit on "assets" that, if digitized, are unbeatable.
The first "asset" is the Brand Equity
Brand equity brings trust to the table. Credibility gives incumbents a trust advantage. Research consistently shows that consumers rank established banks higher on safety and security; two factors that still decide what people consider is the safest place for their money.
The second "asset" is their Customers
Established financial institutions have big customer base and untapped customer intelligence.
Every bank has loads of customers that have not been activated digitally, and by activated we are not talking just about access to the digital channels but mostly about getting them to buy digital products. As always it is easier to sell to an existing customer than acquire a new one and the incumbents clearly have the advantage. Moreover, though, the multi-year transactions can help a bank get deep customer insights that can fuel personalisation and smart offers.
The third "asset" is the product breadth
This product bread which leads to higher retention, increased LTV and provide opportunities for more aggressive customer acquisition.
From checking and savings to mortgages, cards, investments, and insurance, incumbents have the widest product shelf in the market. Neobanks can't compete on the breadth or on heavy products like mortgages or big-ticket credit. Product options mean that the customer is not required to shop around for different unmet needs. Product breadth also leads to opportunities for cross-sell that lead to increased lifetime value (LTV) for every new customer. And here lies the opportunity.
A richer LTV profile gives room for more aggressive acquisition spending than most neobanks can afford (that usually run referral campaigns). Put it simply, incumbents can advertise profitably with higher CPAs.
The last "asset" that is literally a financial asset is Capital
Although neobanks dominate headlines, they still control a small % of deposits. Deep balance sheets means that traditional players can underwrite and fund lending at scale. Loans remain the revenue backbone of banking, and the ability to extend credit gives incumbents an inherent advantage in monetizing customer relationships digitally.
Most traditional banks view the aforementioned assets as defensive assets. But the best defence is offence and paired with digital revenue levers, these assets become offensive weapons. The banks that win won't be the ones that only protect what they've always had but those that translate trust, customer depth, product breadth, and capital strength into optimized customer journeys, personalized offers, and seamless digital experiences.
Established financial institutions are not underdogs; they're incumbents with moats. The winners will be those who turn these moats into digital momentum.