People do almost everything online now. We shop online, read digital books, stream music and watch movies online. Digital services have never been so important, particularly for the banking sector.
With digital banking on the rise, it was inevitable that new, digital banking challengers appear on the horizon to provide the mobile experience that millennials increasingly crave. These challenger banks, unburdened by the legacy IT systems of some of the bigger, more traditional players, are well placed to provide agile, responsive and streamlined services.
Since 2012, the Bank of England has granted licences to 21 new providers aiming to rival the big four banks. In the past month alone, we’ve seen the launch of the first ever digital-only player Atom, as well as the launch of B, an app-based provider from Clydesdale and Yorkshire Bank.
Atom prides itself on making banking easier, intuitive and purely mobile, and there whenever you need it. B’s offering gives an onus on saving – giving its customers a hand planning for that special something by letting them set up personalised saving pots for different goals.
The success of these new market entrants has been mainly placed on increased customer experience and satisfaction. In today’s world where anything can be rated and reviewed – from hotels to restaurants, from China’s Great Wall to the person you rate on your dating app – customer satisfaction is more important than ever. This is a sore point for established banks, with the Big Four projected by Consultancy.uk to lose almost £4bn by 2018 due to poor customer experience.
Challenger banks have a technical advantage due to their younger and more flexible IT systems. This means they can adapt to new trends and new technologies without needing to overhaul a vast network of legacy infrastructure to do so. They can be more agile and keep pace with consumers’ rapidly changing preferences. This stands them in good stead amongst millennials who run their lives through their mobile phones, checking their devices a staggering 85 times a day.
These young institutions are in the perfect position to streamline the whole banking experience, transforming money management from being a chore to being the simplest of processes, available at everyone’s fingertips. A recent study by KPMG’s recent study found 23 per cent of current account users hold a type of account or financial product with a ‘challenger’ bank (KPMG’s definition of a challenger is someone other than the big 4). If they continue to win customers at the same rate, it will be interesting to see what the banking landscape looks like five years from now.