New banks

‘I’m reading Blitzscaling right now’: Consumers are driving the growth of challenger banks in the US and Europe

  • Senior execs from Revolut, N26, and Chime joined us for a webinar this week.
  • All have millions of customers and it feels like they're just getting started.
close

Email a Friend

‘I’m reading Blitzscaling right now’: Consumers are driving the growth of challenger banks in the US and Europe

It’s more pull than push when it comes to growing a new challenger banking brand. Some of the top firms don’t even have a dedicated marketing function, relying instead on their users to spread the word. Millions of consumers have opted-in to open accounts at firms like Chime, N26, and Revolut.

Senior executives from these three fast growing neobanks joined Tearsheet earlier this week to talk about trends in digital banking. A common thread echoed by each participant was the excitement around new user acquisition.

Consumers seem to be driving much of this move toward challenger bank adoption. And for many new account holders, it’s about the challenger banks’ modern user experience that more closely resembles other popular apps like Airbnb than a traditional bank.

“Challenger banks deliver a great user experience, consistent across the suite of products they offer,” said Dan Westgarth, general manager of North America for Revolut.

“I compare that to my UK bank, where I have a debit card, a checking account and a mortgage. The user experience that links those products together is incredibly poor. There are inconsistencies in the data, the bank systems don’t connect and pass data as they should, resulting in a terrible experience for the user. This pushes consumers toward the challengers.”

Traditional banks have invested billions of dollars in strengthening their own brands. And in finance, trust sells. But what’s interesting here with the challengers is how trusting new customers are to their brands, in spite of the fact that these companies have only been around for a few years.

“Brand and trust are key drivers here,” said Nicolas Kopp, N26’s US CEO.

“People have lost trust in traditional banks and they’re very confident in trusting newer technology players. The new reputations of challenger banks — as well as their new vibe and feel— is an advantage for us.”

But a slick user interface only goes so far. Traditional banks are catching up and improving their apps.  “You can go to the App store and Chase has 5 star ratings,” said Chris Britt, co-founder and CEO of Chime.

“The banks have invested billions of dollars to improve their technology and user experience. It’s not that bad. Just thinking challenger banks will win because they have a slick user interface is missing the point.”

If technology and design is on par between incumbents and the challenger banks, then the upstarts seem to be doing a better job communicating their value proposition: namely, that they’re more partner than adversary to their clients.

“I think there’s a huge portion of America that is struggling with their traditional banking relationships,” Chime’s Britt said. ” We’re focused on the needs of a huge portion of America that struggles with the fact that how banks deliver and price their services is adversarial and punitive with fees.”

Customer feedback and sentiment is a key driver in challenger bank’s product development cycles. These institutions spend a lot of resources taking their customer’s temperature. Without physical branch infrastructure, challenger banks lack face time in front of their clients. They make up for it in different ways.

“We have a Slack channel where we share customer feedback from members,” said Britt. “I probably read 50 to 100 comments every day. We’re active on social media, too, because we can’t rely on physical branch infrastructure.”

Revolut first launched in the UK, where instant transactions, payments and notifications were becoming table steaks for challenger banks. It soon saw an opportunity to spread that level of immediate gratification to other markets.

“It’s pretty common in the UK but not in the Eurozone,” said Revolut’s Westgarth. “So, there’s an excitement when we bring that there. I think it will be the same when we get to the US. I don’t think there’s real instantaneous transaction infrastructure in banking. People are used to using third party apps, like Venmo, for that. We’ll provide a financial ecosystem that allows customers to transact instantaneously, no matter what financial product they want to use.”

Monitoring and responding to customer feedback is just half the puzzle. Top technology firms use this customer feedback loop to inform product decisions. Challenger banks the same methodologies top technology firms to in an effort to create products people love and use.

“The key here is that we approach consumer facing and app development from a consumer tech angle, not like a traditional bank,” said N26’s Kopp.

“It’s all about fast iterations, getting customer feedback on what we’re developing, and developing the product in small, incremental steps.

0 comments on “‘I’m reading Blitzscaling right now’: Consumers are driving the growth of challenger banks in the US and Europe”

New banks, Online Lenders

Digital lender LendUp launches a challenger bank

  • LendUp has introduced its own challenger bank, Ahead Financials.
  • Ahead will provide digital banking and financial education to emerging middle class consumers.
Rimal Farrukh | December 02, 2020
New banks

How teens will bank in the future may depend on how they bank now

  • Financial products designed for teens are increasingly hitting the market this year.
  • Teens want financial education as part of their banking services.
Rivka Abramson | November 30, 2020
New banks, Podcasts

Building the Marcus brand: Goldman’s 2021 vision for its consumer banking product

  • Marcus by Goldman Sachs, Goldman’s consumer banking product suite, reached $96 billion in deposits in the third quarter of 2020.
  • Goldman will grow the Marcus product suite in 2021, encompassing checking, wealth management, savings and personal finance management.
Suman Bhattacharyya | November 25, 2020
New banks

The first LGBTQ digital bank launches in the U.S.

  • The LGBTQ community in the US is estimated to include 30 million people with $1 trillion in spending power.
  • Underserved by incumbent banks, Daylight launches to better serve the needs of the LGBTQ community.
Rimal Farrukh | November 19, 2020
New banks

‘Making a meaningful impact throughout our footprint’: CIT Bank launches its Thanksgiving ‘Two Million Meals’ campaign

  • As in previous years, CIT Bank is launching a Thanksgiving campaign in partnership with Feeding America.
  • In light of the pandemic, CIT Bank is doubling its goal of donating 1 million meals to 2 million meals
Rivka Abramson | November 18, 2020
More Articles