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Will Challenger Banks Win Market Share?

by John Bates, on 1/14/20


According to a research report by CB Insights, The Challenger Bank Playbook, “Challenger banks first made in-roads with consumers who lost faith in institutional firms following the global financial crisis.”  

These companies differentiated themselves by making customers feel valued, providing services that appeared more empathetic to individual needs and circumstance (for example, charging low fees), and offering greater accessibility and convenience. In the years since the first challenger banks emerged, these organizations have become a true force to be reckoned with for traditional banks—and this trend shows no sign of abating.  

For example, challenger banks Varo and Chime recently announced a free overdraft service in response to consumer demand. Other industry players are offering similar services which, though they incur a small fee, are still significantly cheaper than the overdraft offering at traditional banks. Writing about the news for Bankrate, reporter Mary Wisniewski stated, “What sounds like a subtle rollout represents something big: challenger banks are attempting to destroy a traditional banking business model to benefit consumers.”  

There is another critical trend challenger banks are harnessing in an effort to seize market share from established banking institutions and deliver on customer expectations—namely, digital transformation. As the CB Insights report put it, challenger banks “…have grown on the backs of improved user experience, appealing to those who want to be able to bank from their phones instead of visiting a retail location.” With the Generation Z demographic a fast emerging sector for financial institutions, the responsive, accessible digital experience afforded by challenger banks will likely only become more desirable 

Challenger banks have certainly organized their business model around customer convenience but, in order to truly be successful, it’s important that they also extend this customer-focused approach to testing their websites and applications. In order for digital properties to deliver the high-quality, always-on experience by which challenger banks differentiate themselves, it’s critical that these companies reorient testing around the customer. Eggplant empowers companies to evolve their testing strategies from focusing solely on compliance to testing from the user’s perspective, understanding how customers are interacting with the technology and how this behavior is affecting business outcomes.  

Learn more about Eggplant’s customer-driven approach to testing, and why it’s an essential strategy for any challenger bank looking to scale for ongoing success.  

Topics:Customer ExperienceFinancial Services

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