Challenger Banks Are The Toughest Competitors Of Big Traditional Banks: Here’s Why

Challenger banks, with the help of newer technology, have really posed a stiff challenge for big traditional banks. The banking sector has undergone a gradual revolution. Whether it’s the introduction of the ATMs in the 70s or contactless payments a few years back, the banking world has experienced a digital change from time to time. Owing to the entry of new competitors and a new bunch of operators stepping into the sector leading to a fintech revolution, the competition has increased substantially. Along with that, there has been plenty of innovation to offer improved banking and financial services to business and retail customers. Get to know more about how challenger banks are putting the traditional banks to tough competition.

Offering Positive Experiences

The challenger banks have added ancillary services and have introduced experiences that are effective in retaining and serving the customers. Banking and customer services have become more personalized and much easier than before. The incumbent banks have invested in fintech and are pushing towards app-based banking as well as acquisitions to keep pace. However, they are highly dependent on legacy technology which eventually poses a problem for them. If the customer satisfaction surveys are anything to go by, the difference in capabilities of traditional and challenger banks is pretty much visible these days.

Providers that are making use of technology to automate or boost financial services can introduce new and improved savings, investment, lending, and money management products at lower costs, as compared to traditional banks. If you look at the future, when the coming generations will search for a personalized and trusted provider of money-management support, the challenger banks will probably deliver the services while the traditional banks will then lag. Challenger banks depend more on cloud-based technologies that provide powerful and safe ecosystems.

Failure to Fully Adopt Cloud Technology

If you talk about cloud technology, the traditional banks, as a matter of fact, were the first to adopt it, but not fully. They were making use of only a fraction of its potential. The traditional banks were confined to managing customer relationships, email, and other non-critical systems. Even in the present times, only a handful of incumbent banks have been utilizing cloud technology in applications like loans and deposits. Some banks are still worried about the security of IT infrastructure and customer data. This is a major reason why traditional banks are in a disadvantageous position.

The maintenance of data centers, as well as legacy hardware, is proving to be expensive. On top of that, confidential data is prone to system failure and even a cyber-attack. Compared to that, challenger banks are making maximum use of the flexibility and scalability of cloud technology. This helps them in fulfilling the requirements of the customers. Since these banks don’t have anything to do with the complexities of the IT infrastructure, they cater to the customers more effectively and cheaply.

Flexible Compute

Cloud technology has several operational advantages to offer. As they are hosted in the cloud, the challenger banks are quite likely to have flexible access to additional power when required. Through machine learning applications and artificial intelligence, they can analyze the vast data they gather from whatever communication they have with their customers online. The tools these banks get at their fingertips allowing them to comprehend the spending and savings habits of those banking with them in a much better way.

They are equipped to offer additional services, the benefits of which were unknown to the customers. The challenger banks aim to develop their customer services by utilizing their technological advantages continuously. That’s helping them win the customers’ trust – the most valuable commodity in the financial services industry. This trust is earned when the challenger banks make sure they offer the best retirement plans, the best mortgage, and other services.

Similarity Between Challenger Banks and Data Rooms

The data rooms avail cloud technology to ensure that high-security levels are maintained and high-quality customer service is provided without a hiccup. Scaling and innovation are the other two key factors that are kept in mind. The challenger banks operate on these very ideas and that is the main reason for their success.

As long as traditional banks are not able to tap the full potential of cloud technology and continue to bank more upon the legacy systems, the challenger banks will keep on surging ahead of them.