Challenger Banks have a golden opportunity to gain market share. Mature Challenger Banks such as Metro Bank, Tesco Bank and Virgin Money have certainly made headway in stealing market share from the “Big Banks”. Metro Bank alone has 655,000 customers, a year-on-year rise of 46 per cent, with deposits rising by 78 per cent to £5.2 billion. These banks are exciting the financial services sector with promises of a sleeker, faster and more personalised way of banking; to fit in with a millennium lifestyle.

The established banks still dominate the market, with the UK top four banks holding onto a 77% market share. Challengers certainly need to prove their value to customers who often need to be incentivised to part from old established brands.

Are Challenger Banks doing enough?   

Providing excellent customer service is a sore point for established banks, with the UK top four banks projected to lose £3.7 billion in revenue between 2015-2018 due to poor customer experience. Despite the attempted modernisation of banking systems, as Andrew Tyrie, Treasury Committee Chairman stated, this has at times led to a complete breakdown of IT services.

Challenger Banks are at an technical advantage due to their younger IT systems, however having modern systems does not automatically lead to modern customer service experiences. A key way Challenger Banks can improve customer experience is to gamify engagements. Banks in Eastern Europe and North America have introduced gaming-esque approaches for customers to deposit money or spend money on certain items and rewarding customers for doing so.  

Unifying and integrating multiple customer channels can enable banks to offer a truly personalised service to account holders. Branches and online accounts are still disconnected from one another, front-line staff are only able to access basic information about a customer meaning only a small fraction of the true value of their data is being used in Metro, Virgin and Tesco.

As data mining capabilities improve, financial products on offer should provide customers with custom-built deals on mortgages, new mobile phone offers or student loans to account holders as they need them, perhaps before they even ask.

Is customer experience enough to disrupt the market?

Previously, an established brand identity was more important to banks than customer experience, this need not be the case today. Digital disrupters such as Airbnb and Uber are shaking up the market with online, on-demand services. Bank customers can now access comparison sites at a click of a button thus having a recognisable brand will not attract customers if there is a one-star review next to its name.   

The banking sector is yet to be hit by a major digital disrupter, but Mondo, Secco and Tandem are aiming to achieve this. Yet to achieve this they need to offer something more than the safe, generic online banking experience.

Challenger Banks should invest into new payment technology such as blockchain and Open APIs to speed up bank transfer times. This means payments can be made instantly, rather than relying on legacy banking systems to process transfers that could take hours or even days.

Innovation in the Internet of Things should also be seen as an opportunity for Challenger Banks. In the near future, payments for pizza can be made from a Connected Car. There will also be apps that track location and offer deals based on the customer’s vicinity, banks have the opportunity to make use of vast amounts of data and innovations to boost customer experience.      

As well as making payments faster, banks need to re-invigorate their customer experience platforms if they hope either to defend against or even become the next digital disrupter. As providing customers with personalised deals can only be achieved if the customer experience platform is integrated and data is not siloed.

Established banks need to implement a new middle-layer of IT infrastructure, which will reduce the tangled web of banking IT applications and grants access to all data on a single platform. Thus empowering front-line staff to provide great service, regardless of whether the customer reached out to them in branch, online or on social media channels.

Properly equipped, Challenger Banks can be the ‘saviours of customer experience’ in the financial sector if they are able to use all the data they have on customers. Challenger Banks need to revolutionise the customer experience along the same lines as other digital disrupters and lead the old guard. If not, customers will continue to go to the tried and trusted option.        

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