The rise of challenger banks has been a particular hallmark of the fintech industry over the last decade. Created to disrupt the traditional banking sector, challengers are full to the brim with innovative, often digital offerings aiming to serve customers in a variety of ways. With the customer taking centre stage and newfound co-operation with incumbents, this month we explore some of the classic attributes of challenger banks and their efforts to stay one step ahead of the industry.
Banks at every level are having to keep in touch with their customers like never before. The ability to be personal has become the ultimate decider of who falls and who flies within the industry today.
Here in the next segment to our challenger bank focus, we caught up with some industry experts to answer the question on everyone’s minds: is personalisation the future of banking?
Here, Jehan Sherjan, insights director at SRM, emphasises how future technologies will deliver increasingly personalised customers solutions, and that it’s the industry’s responsibility to include everyone: “Every consumer is on their own individual journey through life. Their needs, wants and preferences will be unique to them and their particular circumstances. Relevant products, services, support and advice should form the bedrock of a modern banking service.
“Technology can provide automated and personalised support, in particular the use of artificial intelligence (AI) to deliver support across a range of channels, be that transactional or conversational, on a mobile device or through a virtual assistant in the home.
“However, personalisation should not come at the expense of inclusion. The financial services sector has a responsibility to work for all parts of society and greater personalisation should not exclude those who may not have the financial resources to consistently play within the rules of the game.
“We all need a money concierge. How we choose to use that is very much personalised.”
Sudarshan Dharmapuri, chief product officer, Webex CPaaS at Cisco, paints a future where personalisation becomes an essential pillar of the customer journey: “Hyper-personalisation is key to improving the customer experience (CX) and that starts with financial institutions building their customer journeys with customer preferences and context in mind.
“Using our CPaaS platform, Webex Connect, we have worked closely with Tesco Bank to enhance its customer interactions and increase overall usage of its mobile banking application which includes personalised payment reminders and notifications as well as proactive fraud and overdraft alerts.
“We recently commissioned a research study where consumers told us just how important it is that the brands they interact with deliver relevant, personalised communications and service updates. Two-thirds of our survey respondents said that relevant communications based on information from previous interactions and preferences are extremely or quite important. Sixty per cent feel the same way about communications that are personalised and tailored to them.
“Personalisation is no longer a pleasant extra; it’s now an essential part of CX that many consumers expect as part of the communications they receive from brands. By interacting with customers on their preferred channels, with more relevant, targeted communications businesses can improve brand loyalty, reduce customer queries, and increase their revenue.”
Ben Conant, co-founder and CTO of MANTL, identifies how personalisation has become a priority in the highly-competitive world of banking, and that accurate data is now more important than ever: “Data drives personalised digital experiences across nearly every industry, from food delivery to retail. Within these experiences, customers don’t just expect to be treated uniquely, they also expect to be treated in a way that aligns with their values. Banking is no exception.
“Traditional banks must prioritise providing hyper-personalised experiences in order to compete with digitally-savvy challenger banks while deepening customer relationships. The global neobank market is expected to reach $600bilion by 2028, and these challenger banks — many of which target niche audiences, like gig economy workers or gen z — use personalisation to deliver superior customer experiences and build trust and loyalty.
“Before the rise of digital-first banking, welcoming in-branch experiences and excellent person-to-person customer service was enough to develop deep customer relationships — but this has fundamentally changed. To maintain a customer relationship edge over challenger banks, community banks and credit unions need to get serious about leveraging their most valuable asset: data.
“Community financial institutions that succeed in the digital-first environment and offer competitive personalised experiences will use data to enrich the customer relationship at every step of the customer journey. This requires going far beyond standard recommendation systems and leveraging machine learning for dynamic hyper-personalisation.
“This gives traditional institutions the ability to use data and analytics to develop a deep understanding of each customer’s needs and desires to orchestrate a set of tailored experiences across digital and human channels.
“With the widespread adoption of data warehousing solutions and machine learning as service providers, community financial institutions have an opportunity to build on the trust they’ve earned within their communities by creating a more fine-grained picture of each of their customers’ individual financial lives without needing to develop a core competency in artificial intelligence or data engineering.”
Justin Howell, co-founder and CEO of Rize, predicts the arrival of more cause-focused challenger banks within the industry: “I absolutely agree that hyper-personalisation is going to be imperative for retail banking moving forward. If we look at retail banking historically, the products offered were really quite commoditised. They were designed and rolled out with a one-size-fits-all mentality.
“However, this is starting to change, and the change is being driven by fintech. We are starting to see the first true wave of successful consumer banking applications delivered by fintech organisations.
“Fintech neobanks focused on either underbanked populations such as Chime or Money Lion and European-based companies like Rovlut and N26 are capitalising on the fact that many existing banking experiences, particularly when it comes to mobile, are particularly underwhelming. In this case, simply coming in with something that had a better mobile user experience was enough to create some real differentiation.
“The next wave of neobanks, and consumer banking focused fintechs, are taking that personalisation to an entirely new level. You’re starting to see neo banks popping up focused on a whole variety of communities. In some cases, these communities are based on the actual work you do like gig workers, 1099 workers, or college students.
“In other cases, they are building around affiliations–like black Americans or the LGTBQ+ community. Not only are they building around these affiliations and marketing around that, but they’re also actually building products that are really tailored to the needs and wants those specific customers have been looking for their current banks to provide.
“So if we bring that back to retail banking, it’s imperative that all financial institutions look to build more flexible products tailored to the needs of specific types of customers, but that’s just a stepping stone. I predict that you’re going to see retail banks actually start to focus on specific segments of customer communities themselves so they can not only provide better experiences but be more targeted for their messaging and advertising dollar.
“I think about the fact that millennials grew up with the internet, but gen z in particular has grown up with mobile and their entire experience has been through their phones. Their expectation is that they’ve seen across every other aspect of their life become hyper-personalised so you have to expect interactions with financial services to do the same.”
Right product right time
Alex Manly, associate director of strategy for financial services, UK and Europe, Movable Ink, comments on how the leading strategies of challenger banks today will spill over into the services of incumbents tomorrow: “It’s no secret that challenger brands are considered the leaders in customer personalisation in the industry and they are shaping the future of personalisation in banking.
“As challenger brands continue to build stickiness and expand offerings, such as buy now pay later (BNPL) brands like Klarna moving towards ‘super app’ strategies; and crypto gaining more mainstream traction with brands like N26 or Revolut stepping into the fold, we anticipate a substantial uptick in traditional financial brands following suit. As a result, personalisation will become even more paramount to ensure each customer is shown the right product offering, at the right time – beyond legacy financial products.”
The personal touch
Corey Besaw, president of banking operations of Ubiquity, concludes our discussion by describing a future where innovation will have to work at break-neck speeds: “It’s really about innovation, not just personalisation. The bottom line is that if you build products that have a substantial set of potential product features, you’re going to appeal to more customers. These features don’t all have to be relevant to every customer, but the convenience and personalisation part is that you let customers choose which features are most relevant to them.
“We see diversified product features being very valuable with gig economy workers or anyone that has uneven cash flow during a typical month. An example of a flexibility feature might be adding easy access to more of their accounts. Another might be adding personal lines of credit that look like a hybrid of checking account and credit account.
“We see also that challenger banks are trying to diversify their features to not just offer traditional account types but also have innovative products for saving and investing. Again, these are not always relevant to every customer, but the key part is that you give customers the choice to design a complete banking relationship that works for them, on their terms. And personalisation can add the complete experience of an environment that’s technically integrated.
“And personalisation can benefit from data collection and having a customer’s interaction history informing online or agent interactions. Patterns can be identified and recommendations can be made in a personal way to create a differentiated experience.
“And finally, AI can guide virtual assistants to deliver more personalised interactions. Machine learning models can predict product features that might be useful to customers and predict upsell or cross-sell opportunities. These initiatives don’t have to be only about driving revenue either. The personal touch is connecting with a customer and making them aware of something available, even if no cost is involved.”