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 new found 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.
A Deloitte report outlined that hyper-personalisation is “an imperative for banks”, allowing them to respond to customer needs, as well as differentiating their brand, boosting revenues and helping to improve financial inclusion. It is these tailored solutions that challenger banks are leading the way in, elevating customer journeys through technology and increasing customer satisfaction.
Here we asked some of the key industry players as to why tailored banking solutions are so important in what is an incredibly competitive market.
Reena Raichura, Director, Head of Product Solutions, Glue42, believes that tailored banking solutions are key for the future.
“Digitally savvy customers expect an ultra-personalised and bespoke service front-to-back and won’t hang around if a banking solution or service is digitally lacklustre at best,” she said. “Therefore, there are a number of themes that come to mind to create a true end-to-end hyper-personalised customer experience:
“Simplification – In a digital world, having a fast, easy-to-navigate, user-friendly platform is key therefore, simplifying the use of banking apps, websites and communication channels so that complex customer journeys become seamless and easy to navigate is important. To do this firms need to be looking at platform modernisation with a broader lens by analysing customer workflows wholistically to then build out tailored solutions. Desktop integration technologies can help in this space as banks look to blend best-of-breed products and give their customers an effortless, cohesive, and attractive user experience regardless of which channel they are using.
“Hyper-personalisation – Simplification is not just important for the customer experience but also for the advisors that are servicing customers. Previously, when dealing with a customer, advisors have had to swivel-chair for information between different applications. Not only is this an inefficient use of time but advisors miss important data to help them engage with a customer. Using desktop integration technologies, agents can now compose customer-centric cross-application workspaces so that when a customer contacts them, in a single click, they have all the data they need at their fingertips and thus create this ‘hyper-personalised’ experience.
“Proactive Customer Engagement – It won’t be enough though to service the customer when they contact a firm. Hyper-personalisation will need to extend outwards too in the form of ‘proactive engagement’. Customers expect to receive insights, information, and notifications that are highly contextualised and tailored to their needs in the right format, at the right time, and through the right channel. To achieve this, different channels of communication will need to be aligned in the types of data and information they provide to provide a consistent experience throughout.”
Co-Founder of Capitalixe, Lissele Pratt thinks that tailored solutions are becoming a critical offering for banks.
She said: “Banks have long been providing general banking products and services to their customers. However, in today’s increasingly competitive marketplace, it is becoming more critical for banks to offer tailored banking solutions specific to each customer’s needs. This is because customers are becoming savvier about what they want from their banks, and they are no longer content with simply using a general banking product.
“There are several reasons why tailored banking solutions are so important. Firstly, customers want products and services that are relevant to them and that meet their specific needs. If a bank can provide products and services tailored to the individual, it shows that the bank is listening to its customers and is committed to meeting their needs.
“Secondly, tailored banking solutions can help banks to build stronger relationships with their customers. When a bank takes the time to understand its customers’ needs and provides products and services specifically suited to them, it demonstrates that the bank cares about its customers and wants to maintain a strong relationship with them.
“Lastly, tailored banking solutions can help banks to stand out from their competitors. Suppose a bank can offer products and services that are unique and different from those of its competitors, such as a specific type of credit card or a unique savings account. In that case, it will be more likely to attract new customers and retain existing ones.
Serving a niche market
Philipp Buschmann, CEO and Co-Founder of AAZZUR said:
“It is very simple, if there was only one restaurant in town you will only go to that one, whereas if there are 100 you will choose where you want to eat, and who offers the best service. In Financial Services it used to be all of the offers and products were the same, yet if you look at how the sector is now changing there are now dozens and dozens of services offered in unexpected ways. So, going back to the restaurant analogy if you don’t want to offer a variety of options in these choice-driven times, you will lose a bunch of people to the other restaurants.
“People will be more attracted to the offering that is ideal to their circumstances. The only thing you can do as a large bank is to provide tailored services. Personalisation and contextual services are the future of banking. This is the same across many different sectors, if you purchase a hairdryer through Amazon, chances are you will be interested in hair curlers too. If you watched a particular genre on Netflix, it is likely you will watch something else of a similar genre. This idea that financial services can also be offered at the point of need follows this trend and will open up revenue streams from demographics that previously wouldn’t have purchased add-ons or financial products as they simply weren’t aware or didn’t think they would need them.
“Looking ahead we will see challenger banks that are completely designed to serve a niche market. There will be niche challenger banks that focuses on families, or on small businesses or on students, offering tailored and personalised products.
“It’s not just about the engagement that you can drive through tailored services. It is much cheaper to build tailored services so they will proliferate. Tailored banking solutions will be a big issue, in a market that is so personalised, incumbents should be afraid to die by 100 paper cuts.”
Alex Manly, Movable Ink’s Associate Director of Strategy for Financial Services, UK & Europe said: “over the last two years, customer behaviours have grown in complexity.”
The continued: “This has disrupted the way brands approach segmentation and incentivised them to provide more flexibility; from ensuring that customers’ unexpected financial conditions can be managed responsibly to ensuring that rewards programs meet evolving customer needs. Tailored banking solutions means looking at customers on an individual level and prioritising financial wellness to create a win-win situation which meets customer needs and rewards brands getting it right with their loyalty.”
Corey Besaw, President of Banking Operations of Ubiquity thinks that tailored banking solutions are a strategic brand differentiator as “challenger banks are trying to distinguish themselves from both traditional banks and other challenger banks.”
He continued: “Tailored solutions are a strategic brand differentiator because challenger banks are trying to distinguish themselves from both traditional banks and other challenger banks. They have to answer the needs of a consumer who asks: “Why should I use a new digital bank?” Challenger banks need to present a real value proposition, and more and more that comes from convenience features that depend on tailored banking solutions.
“The cost of entry to start a challenger bank has never been lower than it is today. There are lots of technology solutions, lots of companies that aggregate services together—essentially a “full-stack” of what a challenger bank needs to support banking operations. These support services now come together as a package, so it creates an environment where very niche challenger banks try to appeal to customers based on an “affinity” of one type or another.
“Examples of an affinity might be a social cause customers want to support, favourite sports teams, or other personal values-based organisations. But the truth is, a lot of these challengers ultimately have very similar product offerings. In my mind, the most successful challenger banks are those that really do create a more personalised or tailored product with features that are actually adding some kind of meaningful benefit to peoples’ lives and are not just based on an affinity or marketing campaign alone.
“Today’s neobanks are trying to redefine “service.” They have found that it’s critical to understand who the customer is and what they need, then ensure that customer engages with product features that are relevant to them. So, a lot of challenger banks have many different ways to add or access funds. Tailored solutions are one more opportunity to educate users about services and options and try to make banking transactions easy for them.”
Finally, James Butland, VP of financial partnerships, EMEA at Airwallex said: “As a retailer you need to understand the key consumer drivers (i.e. price, speed, internationalisation, etc) and how best to embed those solutions. For example, if you’re a retailer that provides consumers with a local shopping experience online (i.e. using localised payment methods), it opens a wider customer base and can help you convert more customers at checkout and ultimately improve your bottom line.”