Challenging the Challenger Banks
FT Partners’ new report, titled The Rise of Challenger Banks: Are the Apps Taking Over?, notes that Brazil’s Nubank is presently the largest banking challenger in the world with around 15 million customers. It is followed closely by other major challenger banks such as US-based Chime, Germany’s N26, UK-based Monzo, South Korea’s KakaoBank and Europe’s Revolut, which is currently ranked as the third-largest challenger bank.
Further, these challenger banks have been aided well by revolutionary changes being made to the regulatory environment. Regulatory developments such as PSD2 (Open Banking) have helped Fintech startups and challenger banks establish themselves firmly in the traditional banking industry.
While Challenger banks are gaining fast in terms of customer acquisitions, traditional big banks are equally aggressive, coming out with their own digital solutions or simply acquiring smaller fintech startups to get a head-start in the digital race.
Amidst this continuously evolving and constantly disrupting space, it is the Small/Medium Banks and Financial Institutions that are seeing a steady erosion of their customer base as more and more customers, especially millennials, prefer moving to newer digital alternatives.
As the pressure mounts on such Small/Medium Banks and Financial Institutions, it is evident that not going digital or lagging behind in digital transformation may lead to the eventual demise of such banks and institutions.
Also, read our previous blog on how NOT GOING DIGITAL IS A BIGGER THREAT TO BANKS
How to then not only survive the digital onslaught but challenge the challengers in their own game?
There is no one easy way of getting ahead in the game rather it would be a collective effort of offering traditional services on a digital platform to retain existing, loyal customers while attracting newer customers. Though Digital Banking is disrupting all aspects of banking & finance, some traditional banking services are becoming common more than others. For any Small/Medium bank or financial institution, it would be a good first step to launch digital solutions for these trending traditional banking services before moving to other niche solutions.
Here’s a quick roundup of some traditional banking services that can be offered in a digital avatar to be ready for Digital Banking 2020–
- Seamless Digital Customer Experience – This is perhaps the easiest & fastest way to get going on the road to digital transformation. Be it a website or an app or a tablet app, customers need to look & feel the same experience across all multiple channels.
- Rapid Onboarding using eKYC – There is no seamless customer experience if no one is going to come on these channels. Today getting a customer onboarded in under 15 mins is quickly becoming the norm as the ability to complete KYC of customers using online tools becomes common.
- Data-Driven Customer Profiling – The biggest advantage of customers using digital platforms to avail banking services, is the digital footprint that they create. From spending patterns to client behavior to credit/debit monthly requirements, there are vast amounts of data that can be interpreted in multiple ways to create each customer’s unique profile and their specific needs.
- Digital Marketing using Data Insights – AI/ML-driven digital solutions are providing critical insights into customer habits, spend patterns, etc. These insights are then being used to create tailor-made solutions, frequent marketing offers, specific solutions for specific situations (educational loans, pension schemes, etc) even before the customer themselves come asking for it.
- Lending Apps driven by Credit Risk Engines – Machine Learning algorithms are increasingly being used in lending apps where they are able to consume a vast amount of data and validate each customer’s risk score. This is then being used to create specific loans or lending solutions within the app to help customers get loans in record time (standard average of fewer than 24 hrs!).
- Robo Advisory for Wealth & Investment Management – AI/ML-driven Robo-advisory apps are increasingly helping millennials save money, grow money and invest/reinvest. Sending alerts and notifications when customers are overspending or are ready to invest more or are eligible for a new offer, is helping these Robo-apps become the newest trend.
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- Automated Processes for efficiency – Any digital transformation can only be called a success when the customer experience is flawless. This is only possible when the internal banking processes are as efficient and seamless as the customer-facing banking services. Today the daily, mundane time-consuming tasks are being increasingly automated so that deliveries are faster and accurate.
Small/Medium banks, financial institutions and, enterprises have an existing customer base that has been built over the years based on legacy and loyalty. However, Digital banking 2020 is increasing in scope and engulfing all aspects of traditional banking. It is no longer a restricted domain of elite few but a common, everyday tool for all. Given this reality, such banks/institutions need to reinvent themselves and offer their traditional banking & financial services on a digital platform. They already enjoy a loyal customer base so the only thing that remains is to reward loyalty with holistic digital banking solutions and services.
QuadLogix is a Fintech innovator providing niche, carefully designed ‘White Label’ digital banking solutions with the aim of enabling banks/financial institutions to go to market rapidly with digital products. Visit www.quadlogix.com to know more about us or write to us at firstname.lastname@example.org to get a list of our white label fintech products.
QuadLogix is an IT Consulting, Software & App Development organization delivering end to end IT solutions to Enterprises across the globe. Our deep expertise in Technology, our varied experience across multiple industries and our well designed software best practices makes us the preferred IT consultants & development partners for businesses across the globe.
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