‘Banks are a flight to safety’: Challenger banks are struggling to gain trust during COVID-19
- Challenger banks look for new ways to remain relevant and gain user trust during the pandemic.
- With incumbents given time to improve their digitized services, challenger banks may become less of a rising threat to the traditional banking industry.
Like other industries navigating their way through the pandemic, challenger banks have their own set of challenges to face.
As new competitors in the banking industry, challenger banks have more difficulty than traditional banks when it comes to gaining user trust. During times of economic downturn, this is vital, as customers equate trust with financial security. In this case, traditional banks have the advantage of perceived reliability that comes with being longstanding establishments.
“Part of the fintech challenge is that in times of uncertainty and stress, traditional banks are seen as a safe haven. This partly reflects a flight to safety, as people hew closer to institutions with long track records that they judge more likely to survive an economic downturn,” said Alan McIntyre, senior managing director and head of the global banking practice at Accenture.
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Rather than look at fintech as adversaries, banks should embrace and partner with them. Many banks are lacking top-notch customer service and innovation, which is the fintech sweet spot. On the other hand, fintech need what banks have, which is distribution and regulatory.
Big tech is the real competitor to banks since they have both distribution and consumer experience coupled with an infrastructure that’s able to produce product enhancements at lightning speed.
Banks have the pipes, but they need to offer something more to consumers in order to keep them satisfied. Right now they are encumbered by legacy technology, products, and innovation culture.
For banks to survive they need to bring propositions around not just lending, but all aspects of homeownership, getting an education, starting a business, and improving consumers’ lives. By partnering with fintech, it allows banks accessibility to a greater pool of insight and thought around these propositions.