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A lot has been said about how challenger banks such as Monzo, Atom, Tandem, Zopa and Starling bank are
wowing consumers and investors, and giving established banks a run for their money. However, whilst these challenger banks are building cult-like followerships once attributed to brands like Apple; it’s important to highlight some of the key challenges
The list above is not a one size fits all approach to building a successful challenger bank, but an attempt to kickstart a series of conversations around the future of banking both for established and challenger banks.
I think top of the list is business strategy. Will just "better experience" be enough. Disruption I believe will only come from a change in business model and none have done that yet. Exploiting digital, lowering costs and raising capital will allow you
to play, but to dominate they will have do to something fundementally different.
Well said Dharmesh, strategy has a role to play. However, wouldn't you say they are doing something different with their business models in comparison to Big 5 banks? And isn't it strategic to adopt a different go-to-market proposition in comparison to other
banks? Also, before they can dominate they'd need to compete effectively I believe.
Apart from the "experience" what is different?
When we say 'experience', I'm assuming you're looking at it from a comprehensive perspective - external (customer journeys, touchpoints, and environments where the interaction takes place), & internal (strategy and operations, product engineering & infrastructure...).
If yes, the the difference is how they 'bundle' and integrate the people, process and technology which makes up the business model, into something tangible which is what the customers are buying into. So, the 'experience' is the outcome of their business model
which differentiates them in the market.
I think Product is another important critical success factor for Challenger Banks.
If they launch, for example, a P2P loan product targeted at SMEs, no-file and thin-file market segments, they will quickly make inroads into segments that traditional banks have shunned. If they are able to claw their way up from there, they could disrupt
traditional banks in the classical-Christensen mold. But as long as they just offer the same old checking account and debit card, no matter what their business model or CX, it will hardly make any difference to the mainstream market. They will win some customers
from the Innovator and Early Adopter segments of the market but they will face a huge challenge in crossing the chasm to the mainstream market.
IMO, Technology per se does not matter. How much money they can pay for Technology is what really matters. The same AWS will give varying levels of uptime depending upon how much you pay for it e.g. $100X will get you Backup & Five-9 uptime but $50X will
probably get you no Backup and only 98% uptime.
That takes us back to Investment, which is perhaps the most important determinant of success of Challenger Banks.
19 Mar 2009
This post is from a series of posts in the group:
A community to discuss the future of financial services and any other interesting trends, strategies, ideas, views.