1. Pace of change
While banks are aware of the 2018 deadline for the Open Banking Initiative, which will allow third parties to access bank customers’ data to provide new services, challenger banks such as ING have already launched new services like account aggregator Yolt, putting pressure on others to compete.
2. Different services
Challengers offer new ideas for services. These can be products that are delivered at high speed or via mobile, or have a specifically ethical bent such as Triodos’s offerings, or are targeted at specific customer groups, such as Aldermore’s specialist lending to smaller businesses and entrepreneurs.
3. Mobile banking
Atom Bank, Monzo, Starling and Tandem are all digital-only banks with apps that offer real service via a mobile phone. Importantly those banks allowing developers to build apps based on their APIs are opening up the full potential of the developer community, keeping customers engaged.
4. Community service
Lip service paid by traditional banks to “listening to the customer” is a common frustration. By engaging with social media at the outset, challenger banks are able to monitor customer sentiment to understand their needs. Fidor Bank uses its online community to attract new customers and also assess its offering.
Having a digital-first approach can allow challenger banks to offer the sort of personalisation seen in digital retail businesses, such as Amazon, and apply it to financial services This is something banks built on older legacy technology will struggle to do and turns a challenger into a contender for the banking crown.