The main objective of this paper is to determine the impact of the COVID-19 pandemic on the operations of digital-only banks. In order to achieve the main objective, two methods have been used. The frst method is a strategic analysis, and the second method is a fnancial analysis of the digital-only banks covering two periods, that is, before the emergence of the COVID-19 pandemic (2018–2019) and during the coronavirus pandemic (2020). The strategic analysis of digital-only banks has shown that they have many weaknesses, as well as the fact that they face numerous threats, which are due to the age of fntech banks and competition from traditional banks creating and developing mobile and Internet banking. Preliminary analyses conducted for digital-only banks indicate that most of them generated losses, and these losses were already at the operating level. The return on assets and return on equity ratios showed a slight improvement in 2020, and in most cases the interest income generated was higher than the interest expenses.
The digital revolution began long before the outbreak of the coronavirus pandemic. For years, societies, sectors, and entrepreneurs had been taking steps to digitize their daily lives and operations . However, all these steps were multiplied and accelerated by the COVID-19 pandemic. The crisis faced by economies around the world acted as an accelerator for the digital revolution [13, 28]. Restrictions on movement, closed borders, industries and workplaces, remote working, and huge numbers of illnesses and deaths have caused life to move on a large scale to the virtual world. It would seem, therefore, that for those institutions and businesses that were already operating virtually before the outbreak of the pandemic, this would be a time of exceptional prosperity. In this paper, the author decided to study one group of institutions that had already started operating in virtual reality before the outbreak of the COVID-19 pandemic and which were heralded for success directly because of the changes caused by the coronavirus . These institutions are digital-only banks (further, also called fntech banks), i.e., banks operating without fxed locations, branches, or subsidiaries.
The main objective of the paper was to determine the impact of the COVID-19 pandemic on the operations of digital-only banks. At the same time, the author put forward the main hypothesis that:
H1 The COVID-19 pandemic had a positive impact on digital-only banks by strengthening their business model and improving their fnancial situation.
The coronavirus pandemic crisis has not brought glory days to digital-only banks. In fact, it highlighted their weaknesses, i.e., lack of adequate preparation and experience, as well as lack of customer trust. The age of fntech banks served also as a disadvantage. Digital-only banks are very young financial institutions, some of which received their banking license just before the start of the coronavirus pandemic, which did not allow them to adequately protect themselves and convince customers to use their services.
The fnancial analysis of the selected digital-only banks does not indicate any signifcant deterioration or improvement in their fnancial condition. However, it should be remembered that only a small group of digital-only banks was analyzed, which was due to the lack of data availability. At the same time, the previously cited press reports indicate that some fntech banks were in fnancial trouble. Many of the studied institutions needed additional funding from investors, which allowed them to survive the coronavirus pandemic.