What have challenger banks got over their traditional competitors?
Despite frequent crashes and bugs associated with challenger banks, they’re still growing at a remarkable rate. But why?
Last Thursday, several up and coming challenger banks, including the likes of Monzo and Revolut, crashed – separating customers from their cash for about three hours.
A similar bug happened in March, but it appears to have had no impact on the growth of these brands.
App-powered Fintech disrupters are growing, and fast. Striving to make banking more user-friendly, it’s perhaps no wonder that customers are flocking to them.
Amazingly, Monzo’s loss of £7.9 million last year is down mostly to it being too popular. While they originally only planned to roll out 5,000 – 10,000 cards, they now have 240,000 customers – a number increasing by 5% each week.
Decades of reliability and experience hasn’t protected traditional banking institutions from the influx of app-powered challenger banks. But what do these brands have that traditional banking doesn’t. The answer is decent UX.
Time is Money
Traditional mobile banking is slow. Typically running on a clunky app, payments can take days to appear on your account and cancelling a lost or stolen card can be a long, drawn-out phonecall.
But Fintech has speed on its side. Monzo, for example, immediately deducts the transaction from the account so users aren’t left wondering where their money is going.
Customers can send money effortlessly to their contacts (with a Monzo card) via the app and, if the card goes missing, cancelling your card is as easy as a couple of taps.
But speed isn’t all that the likes of Monzo has on its side.
Information is Power
The mere existence of fitness, food and even sleep trackers prove that we’re a nation obsessed with our data. And why should this be different with money?
Monzo automatically categorises payments, allowing customers to check how much they’re really spending on groceries, or how much their Grande Caramel Latte habit at Starbucks is setting them back.
With the option to set monthly targets, Monzo makes budgeting smart and intuitive. It’s a feature that requires minimal effort from the customer, but makes them feel as if they have maximum power over their spending.
Curve also gives its customers increased power over their money. By linking all your accounts onto one card, users can use the ‘Time Travel’ feature to change the account they paid for something with.
For example, while they may have paid with a credit card – if they had received enough cash into a current account to cover the transaction a few days later, they could avoid interest fees.
Traditional banks might be trustworthy but unlike the institutions, challenger banks such as Monzo and Curve offer users a sense of power over their finances.
There’s no denying the sense of fun either. Monzo’s use of emojis in its messages adds a more human touch and, importantly, a youthful one. The coral card is practically the new status symbol – somehow Fintech brands have managed to make banking fashionable.
As Duncan Keene points out, “UX has become such a crucial part of e-commerce that it will overtake product and price as the key brand consumer differentiator by 2020.”
So, unless traditional banks drastically refocus their efforts towards transforming their UX (which Natwest might be), this is how Monzo, and the other challenger banks will continue to compete, even with the minor hiccups.