A bank that could be considered to be smaller than many others, positions itself in the banking sector in such a way as to compete with the bigger, more traditional banks.
This kind of bank will therefore go out of its way to impress and ensure that it delivers all the services that the largest banks in the world are known for, and it will also ensure that it is known for exceptional service levels in order to compete with the more established banks. These banks are, among some of their features, known for their high levels of innovation and positioning themselves to what could be perceived as the future of banking.
Challenger banks are hoping to enjoy more of the limelight than they have in the past by becoming serious competition for the bigger, better-known banks. They want to, indeed, grow their own market share and attract clients from the established ones.
The typical challenger bank is still new relative to the established ones and may start out slowly, but because of their profile as a younger generation enterprise with all the latest developments in banking and the world of banking at their fingertips, they generally are in a position to make quick strides. This opportunity, of course, demands certain responsibilities. They have to prove to the market that they can compete with, and outshine, the traditional banks and financial institutions.
Challenger banks rely heavily on the use of modern technology such as the internet, the use of smartphones and advanced applications. They also understand that they are talking to a younger, more tech savvy client and therefore they advertise their services and products on platforms where they will find the clients who want to deal with technologically advanced institutions.
Many of them start out targeting SME’s (small and medium sized enterprises) and then, after their initial introduction and successes, spread their wings and start competing directly with the bigger banks. They use a variety of systems for their core banking platforms and digital capabilities.
Many challenger banks may decide initially to concentrate their efforts on a specific segment of the market, or on a combination of services, without necessarily offering exactly what the bigger banks offer. They may, once they have established themselves in a niche market, branch out to other sectors.
An example would be of a challenger that initially offers short term and SME lending, and then later takes on more segments of banking services. Some of these challengers may actually not be banks, or hold banking licences, but they compete with banks. One such example concerns those with an e-licence only.
Some of these challenger banks, of course, are bigger and more active than others and offer the services which traditional banks have been known for in the past. It all depends on how much help they get to start and the kind of support they enjoy. All of them, however, rely heavily on the latest technology to bring the client a fast and efficient banking experience.
The good ones understand that offering innovative products and 24-hour online availability may not be good enough; therefore they will ensure that they offer great service too by being available around the clock and answering questions as fast as they arise.
One of the advantages of the challenger banks, apart from their knowledge of up to date digital products and services, concerns the fact that they can start up fairly easily without the high costs that a shop front on the high street involves. They can build a good business by employing the services of the IT industry and save on expenses. And of course the immediacy of transacting, checking statements and real time banking experiences via a smartphone is, for many, a very attractive option.