Challenger Banks receive a ton of positive publicity. It would appear as if they are re-inventing the banking sector. But is it justified?
The reality seems very different. They offer relatively little that is new and nothing so far that is game changing.
As Tandem founder Ricky Knox said: “A really cool mobile app is great, but it’s not what is going to drive mass customer uptake.” He promises that they are looking for a new business model which brings new economics to the market in a way that the customer can really perceive.
To be fair to him, Tandem hasn’t launched his products yet, so maybe he will surprise us. And his criticism of the existing retail banking business model is fair – its more punishment and inertia than anything else.
What we have seen from all of the Challengers is slick marketing, crowdfunding and nice clean user interfaces.
But many of the core banks have fairly reasonable banking apps so that’s not enough.
The problem seems to be threefold:
- In spite of the apparent customer focus, too many of these challenger banks have got overexcited about their technology and apps. The fact that Atom bank is excited about using the Unity gaming platform as their underlying software is not helping deliver a better product. There is much talk about hyper personalisation and predictive analytics, but it might be better to show it rather than tell it!
- Secondly, although Millenials may apparently like it, who cares about receiving your own logo, and being able to name your bank whatever you want to, as Atom bank does. This feels like a different set of personalised gimmicks to entice me in rather than anything fundamental.
- Thirdly in many cases they are just fiddling with the current account and how you can spend and record your money on an everyday basis.
We need a more fundamental look at how banking should be delivered and not just like a fitness app
Still there are 2 reasons to like Challengers even now:
- They consistently offer better saving rates than the more established banks. In a world of low inflation, this is helpful. How long they can maintain this across a wider set of products is yet to be seen.
- They are definitely trying to provide better access to their customers. Metro Bank’s accessibility is way better than the other established banks
So let’s enjoy the benefits but tone down the hype until they can really demonstrate it!