Author: Rhodri James
Banks are not well-perceived institutions. (Our apologies to any bankers reading this.) In fact, studies have shown that up to 80-90% of the public view them as untrustworthy, and when they violate customer trust, they often have few repercussions except for a quick fine.
Several years ago, the U.K. approached this sentiment with one solution: lowering the barrier to entry for banking and encouraging digital-first establishments. These banks, often very niche-driven and specific in their main functions, have come to be called Challenger Banks.
This model is beneficial because challenger banks enter the market with no established concepts around technology (they can avoid complicated legacy IT systems) or their brand (if they deliver on experience, consumers trust them). While there are many obstacles that Challenger Banks must overcome, they have a leg up from the start when it comes to sentiment. They can speak to jaded customers as the new kid on the block: in a very real, very relevant tone.
Challenger Banks: The Future of Banking?
It has been said that the Challenger Bank movement will determine the future of banking and money, despite the frequent mishaps that innovators often encounter. The key here, is that Challenger Banks, like tech companies, often approach the market with an MVP (minimum viable product) and iterate product portfolios until the right balance is achieved. So, while many large banks are stretched very broadly, operating in product silos, Challenger Banks can quickly refine their overall offering to focus on quality and experience over quantity.
Let’s consider a standard financial category that you may offer, and how the use of technology can improve that experience for the already weary customer.
Mobile Loan Origination
Customers have an increasingly strong preference for the loan origination process to be mobile-friendly and fast, and you (the Bank) want as much of this process as possible to be automated. Simplification for the Challenger Bank, then, involves removing the once long, paper-filled process and making it almost instant – all the while accepting nothing less than improved compliance and mitigated risk.
The smart pairing of Digital Access and Automation powers much of this process. And, while the idea of a loan being commenced and approved during an afternoon at work would be laughable 20-30 years ago, now it’s expected. That’s because of customers’ increasing demand for it.
Offering this type of capability can seem daunting for a startup with 25 employees and big dreams, but launching a mobile or web app that can collect your customer’s application details, integrates with your systems and third-party data sources, decisions that loan, and provides an approval instantly is only a matter of finding the right platform provider.
Instabank’s Loan Origination Software
For example, Instabank ASA is a Norwegian challenger bank that launched in September 2016. We partnered with them at Provenir as a platform provider. It made logical sense:
“Our entire approach is built on simplifying banking. One of the ways we do this is by making the customer experience fast and effortless; from the initial on-boarding process through to every subsequent interaction,” says Robert Berg, CEO, Instabank. “The Provenir Platform gives us speed and flexibility in our lending operations, which enables a customer to apply for a loan at lunchtime, receive immediate approval, and have the money available in their account later that day.
To learn more about how challenger banks and digital approaches are improving the lending world, download our white paper below.
How Challenger Banks Are Capturing Customers' Hearts (And Wallets)