Deposits have long been the quiet bedrock of traditional banking. A stable, predictable source of funds that fueled growth and profitability. The traditional banking model, however, is under increasing pressure from multiple directions, those mentioned above, but, perhaps the most significant force being the rise of nimble, digital-first competitors.

For institutions founded on digital offerings, the recent narrative paints a slightly different contextual picture.

Between 2017 and 2024, customer deposits at digital banks worldwide surged to $15 trillion, highlighting a significant shift towards digital banking solutions.

Furthermore, banks that have embraced mobile technology have seen a significant increase in deposit account openings. Globally, banks opened an average of 291 deposit accounts per 1,000 active customers in 2023, a notable 17% increase from just two years earlier. For institutions recognised as leaders in mobile services, these gains were even more pronounced, with account openings rising to 381 per 1,000 active customers, an impressive 35% jump over the same period.

The trajectory is pretty firmly stapled on, but what will this growing trend towards digital transformation mean for traditional banks whose innovative options are constricted by legacy systems?

Should they rest on their laurels and risk fighting an inevitable losing battle head-on against the agile, next generation digital challengers who aren’t limited by legacy technology?

Or, can they leverage their strengths and address their challenges? not with intent to merely survive, but to lead in a market landscape that increasingly sets modern digital capabilities as the price of admission.

For centuries, traditional banks have been built upon a solid foundation of customer trust. Their balance sheets and established reputations for safekeeping finances remain a powerful asset.Legacy players hold considerable weight and still commit to a large amount of heavy lifting concerning global financial products, with the public generally having still preferred to conduct their deposit account dealings through them for larger transactions, salaries, and bill payments.

However, increasing momentum indicates that this trust is not an immovable asset.

Recent shifts in the market are beginning to put an end to this era of security. Neobanks and fintechs are showing that they can win customers rapidly and at scale. In fact, the market is demonstrating more and more faith in their approach, with many fintechs achieving higher valuations than their banking peers despite operating with a fraction of the overhead and a much smaller deposit base. Their success is a clear signal that the market's perception of value is shifting towards agility, speed, and seamless digital experiences.

Digital-first financial platforms are not simply replicating traditional banking services, but are redefining the consumer value proposition. At the core of their appeal is cost-effectiveness and a lean business model. Neobanks and fintechs operate without the significant overhead of physical branches and costly legacy IT infrastructure, allowing them to pass these savings on to the consumer in the form of lower fees or even free services.

This clear, tangible benefit directly addresses one of the primary pain points associated with traditional banking.

Beyond cost, these platforms excel in user experience, a core area where traditional banks have historically lagged.

This rise of neobanks is a direct result of their focus on user-friendly interfaces and a commitment to providing a ‘smoother UI’, offering unparalleled convenience, including 24-hour access, remote account opening, and a seamless, omnichannel experience across mobile apps and web platforms.

The COVID-19 pandemic served as a major catalyst for this trend, as forced reliance on digital channels accelerated consumer adoption and highlighted the importance of robust digital solutions. 

In this new environment, the relationship between incumbent banks and digital challengers is often framed as a conflict. But as our recent report on the future of deposits highlights, the future of deposits will be defined as much by what banks and fintechs have in common as what divides them.

A collaborative mindset, rather than confrontational, is key to success. Attempting to beat each other at their own game is a potentially wasteful distraction presenting a tragic loss of opportunity, and there is growing belief that partnerships will become a primary strategy, allowing both sides to play to their respective strengths.

The outcome is likely to be more cross-pollination and less wariness;“Banks might play to their strengths through scale, reach and security while fintechs continue to focus on being nimble and innovative. But both types of institutions need each other. Attempting to beat each other at their own game is a distraction – it pulls away resources from delivering added-value services to customers. Instead we may actually see more collaboration and partnerships, even consolidation.” - Simon Moran, Senior Product Manager, Mambu.

Regardless of competition or collaboration, a critical and shared pain point for many financial institutions is their dependence on outdated legacy infrastructure.

A fundamental challenge for traditional banks is their reliance on outdated legacy systems.

These systems are rigid, inflexible, and create a range of unintended consequences. They hinder technology adoption, limit scalability, and create a knowledge gap as a generation of technicians retires.

Unlike agile fintechs operating on modern systems, the architectural rigidity of legacy makes it impossible to respond swiftly to new market demands.

For business banking, these systems often lack the customisation and automation that modern SMEs require to thrive. Similarly, for stored value solutions like digital wallets, outdated cores simply cannot support the real-time settlement and integrations with modern payment schemes that are a necessity for the service.

This technological deficit not only hinders innovation but also contributes to higher operational costs, which are often passed on to customers in the form of the very fees that prompt them to seek alternative services.

The risks of maintaining this outdated model are not theoretical. Incidents like the Wells Fargo system outage illustrate how centralised, legacy technology can leave customers financially stranded and even exposed to fraud.

Beyond reputational damage, this creates a challenging cycle: outdated technology limits service quality and raises costs, gradually undermining customer satisfaction and that crucial ‘trust’ asset that traditional banks have long held.

It highlights a vulnerability in models that emphasise institutional stability while overlooking the need for technological adaptability.

In today’s financial landscape, stability and adaptability can no longer be treated as trade-offs. Both are essential for banks to remain competitive, trusted, and relevant.

So what then is the solution? How can these legacy challenges be addressed, and how can traditional banks leverage their historical public trust asset to flip the script and become challengers themselves in a market transforming?

The answer to these challenges lies in a composable, cloud-native, banking platform.

As the founders of composable banking, Mambu leverages an unparalleled 15 years of global experience with the composable approach to core banking solutions, giving financial institutions the tools they need to adapt and build modern deposits products at scale with absolute confidence.

Mambu’s network of 170+ ecosystem partners, including system integrators, cloud service providers and technology partners, helps financial service providers scale and innovate faster by leveraging fintech partnerships instead of building from scratch.

This solution offers tangible benefits that directly address the pain points of the legacy model:

The financial industry is at a critical turning point, and the battle for account primacy within the deposits space is at the very core of this digital renaissance. The challenges of an ever-shifting and volatile market and the rigidities of legacy technology are very real, but the opportunity for growth through innovation is even greater.

By partnering with Mambu, financial institutions acquire the future-proof agility, flexibility, and security needed to not only meet the evolving demands of today’s market, but to leverage their own strengths to lead the challengers.

To explore further how a Mambu’s composable approach can help you compose a broad array of deposits products, download our detailed product brochures: each packed with insights, our multiple use-cases, and global success stories to demonstrate how organisations are already leveraging Mambu to dominate the deposits space.

Consumer Banking & Deposits: Discover how to revolutionise your consumer offerings.

Business Banking & Deposits: Find out how to deliver digital-first solutions for businesses and SMEs.

Stored Value Accounts: Learn how to tap into the cashless economy and embedded finance.Curious to learn more or have any questions?

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