Insights and News /

24 February 2017

My challenger banking experience

Recently I was planning an extended honeymoon so was looking into payment options for my time away. We needed a solution to meet the following requirements:

  1. A card that could be used anywhere and to which we could easily transfer money from existing accounts
  2. A good exchange rate and low fees for all four of the countries we would be visiting
  3. Quick and accurate information on our spending throughout the trip.

As someone who would never be described as ‘tech savvy’, I was initially surprised and then excited by the range of digitally driven products offered by smaller, niche players. I realised there must be demand for a new, alternative form of banking when, after selecting the card we wanted, we were number 16,000 in the onboarding queue!

The smart phone led business model of these players focuses on offering accurate, up to date data, ease of use and accessible client servicing. The explicit aim is to move away from the more ‘traditional’ banks and offer an alternative. The difference was evident throughout: starting with our use of instant messenger on a smart phone app to play the ‘honeymoon card’ and get bumped up the queue; followed by the real-time spending updates on the app, and competitive rates offered (presumably due to low running costs). Our positive experience made me consider the changing nature of banking and what it is that customers value.

If customers were to ‘shop around’ for the best deal, they may find that this is not with with one single provider, and the time in which all products (e.g. mortgage, cards, FX, loans etc.) have typically been procured from one place may be ending. In addition, a recent survey (September 2016)* found that only 14 per cent of global customers are ‘extremely confident’ in the banking industry and 42 per cent have used non-bank providers in the past 12 months.

I will be intrigued to see how this develops. With the growth of non-banking and more niche providers, challengers need to build on their offerings and grab the opportunities as open banking starts to increase their appeal. They can then start to pick up increasing volumes of customers. Alternatively, the larger banks may react to the threat. Bigger players should look to introduce more inviting solutions for customers, improve customer service and digital offerings and potentially partner with FinTechs to beat challengers at their own game. Either way, it is an interesting time for banking and to work with the variety of different players during this changing time.