Thomas Garcia
- 21 May 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2025Details
- Abstract
- Digitalisation is transforming the delivery of banking services, leading to the emergence of new digital bank business models. Small retail deposits, many of which are cross-border, are the main source of funding for digital banks in the euro area. They follow one of two main types of business model: that of a lender or that of a similar nature to a money market fund. Their lending franchises tend to be narrowly specialised. Digital banks are less profitable than their traditional peers due to their higher cost of deposits and fixed expenses, but they are highly valued by equity investors. The continued growth of digital banks could bring benefits for customers but may also threaten financial stability by displacing incumbents and increasing cross-border spillovers.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
L20 : Industrial Organization→Firm Objectives, Organization, and Behavior→General
O33 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→Technological Change: Choices and Consequences, Diffusion Processes