Member Exclusive

Research: More than half of the industry believes challenger banks won’t be competitive with commercial banks

  • Tearsheet asked professionals what they thought of challenger banks.
  • 57.2 percent of respondents believe challenger banks are overhyped.
close

Email a Friend

Research: More than half of the industry believes challenger banks won’t be competitive with commercial banks

A big chunk of financial and fintech industry insiders don't see challenger banks as making a big dent in incumbent consumer banking. And when it comes to commercial banking, professionals are less impressed.

More than half of the industry insiders polled by Tearsheet don't think challenger banks offerings will be competitive with incumbent commercial banks within 3 to 10 years.

Interestingly, Tearsheet asked 172 financial and fintech industry professionals to rank challenger banks in order of their competitiveness to commercial banks on a scale from 1 to 5, with 5 being the highest. While no individual upstart bank scored higher than 2.18 (Revolut, Azlo and Novo), respondents believe challenger banks are more competitive as a whole over a ten year period (2.36). That may point to an expectation that there will be new players entering the field.

Revolut

Common to many challenger banks, Revolut uses a freemium business model in which it gives a way a free, basic checking account and charges for extras. One of the premium offerings of the UK-based startup is a business account. Revolut continues to roll out new functionality for its business customers, like an expense management tool, making it the highest ranking challenger bank by survey respondents.

N26

N26 is one of the largest challenger banks in terms of users. Like Revolut, it also uses a freemium model. Targeting freelancers, the Berlin-based challenger gives business account holders a Mastercard debit card and some cash back on its usage. Its business offering isn't rated as highly as some of the other challenger banks in the space.

Monzo

Monzo is moving slowly into offering a full-blown business account as it tests things out. The company said it intends to introduce a business account that's more attuned to its customer base's needs, rather than just launch a generic type of account. Without a full release, Monzo ranked as the weakest competitor for business banking among challengers (1.64 over three years and 1.82 over ten).

Monese

Having surpassed the 1 million customer mark earlier in 2019, Monese is working on improving its business accounts. The company partnered with iwoca to offer credit to businesses that qualify. Monese ranked in the middle of the pack as part of Tearsheet's survey on competitiveness for commercial banking business.

Azlo

Unlike Revolut, Monzo, Monese, and N26, Azlo doesn't offer a consumer banking option. With a focus on business accounts, the BBVA-owned challenger bank offers FDIC-backed accounts, financial management tools, and free payments using BBVA infrastructure. Azlo is rated one of the top challengers by survey respondents.

Novo

Novo is also a challenger solely focused on business customers. Novo has been rolling out integrations with many of the popular technology platforms used by SMBs in the U.S. Novo offers no-fee accounts and perks and was also ranked highly by Tearsheet's research panel.

Axos

Axos Bank promotes its own brand as well as functioning as a sponsor bank for other digital offerings. N26's US bank brand was built on top of Axos, for example. Axos has its own federal banking charter and offers small business savings and checking accounts, loans, as well as personal accounts. It doesn't rank particularly high in our survey.

0 comments on “Research: More than half of the industry believes challenger banks won’t be competitive with commercial banks”

Blockchain and Crypto, Member Exclusive

Bankchain Briefing: Banks onboard the blockchain train

  • The lawsuits and insults season is in full swing within the unregulated cryptocurrency space.
  • But cryptocurrency is just one facet of blockchain technology. Tearsheet asked experts for commentary on how traditional banks are experimenting with blockchains.
Lindi Miti | January 27, 2023
Green Finance, Member Exclusive

Green Finance Briefing: VCs are betting on climate tech amid a broader down market

  • Climate tech is accelerating at unprecedented pace, in contrast to the broader tech sector, with global VC funding reaching $70 billion in 2022.
  • This year, however, the growth rate of the climate tech sector is expected to moderate due to a challenging economic backdrop.
Iulia Ciutina | January 20, 2023
Member Exclusive, Payments

Payments Briefing: On Gen Z’s changing relationship with digital payments

  • This week, we talk about Gen Z’s changing preferences when it comes to sending and receiving money digitally.
  • We also discuss PayPal’s evolving BNPL strategy in a crowded market.
Ismail Umar | January 19, 2023
Lending, Member Exclusive

Lending Briefing: There is a recession coming but don’t worry, it’s not 2008 all over again

  • The oncoming recessions is one of the most anticipated downturns in recent history.
  • But things are not the same as 2008, here's why.
Rabab Ahsan | January 18, 2023
Banking, Member Exclusive

Banking Briefing: All aboard the transparency train

  • This week, we take a look into creating transparency within digital-first FIs.
  • We also discuss how banks seem to be overlooking the basics in their offerings, like loyalty programs or advice on investments.
Rivka Abramson | January 16, 2023
More Articles