How Can Fintech Adopt The “Challenger Bank” Mindset for Enhanced Customer Experience?

Apr 5, 2022

Changes in technology evolve at a rapid pace. Yet, the financial sector is slow at adapting to these changes. There are many reasons for this, but the main reason is that the financial industry already has an extensive technological infrastructure. As a result, any changes to new technology can be a costly logistical nightmare. However, digital transformation occurs in the financial sector because financial institutions need to modernize their services and provide more personal financial options to their customers.

The emergence of challenger banks is disrupting the fintech industry. Challenger banks are creating a more competitive marketplace as they grow in the number of customers, accounts, and influence. Yet, fintech institutions can adopt a “challenger” mindset by updating their ageing technological infrastructure to accommodate a new generation of customers.

 

What is a challenger bank?

Technology is transforming the way we interact with financial institutions. Challenger banks are using this technology to transform the experience of their customers. The characteristics of challenger banks include:

  • Being small to medium in size
  • Having an agile infrastructure
  • Utilizing fast, modern banking technology systems
  • Offering a wide range of traditional banking services on a mobile platform

Challenger banks are more agile than traditional banks. They do not have the cumbersome and costly overhead, which allows them to streamline the banking process for a better customer experience. Fintech institutions can adopt the challenger bank mindset to improve customer experiences in the modern financial sector. Here is an outline of some of the ways fintech companies can accomplish this task.

 

Redefining the Customer Experience

Improving customer banking experiences is the primary focus of challenger banks. Embedded finance is a term to describe enhancing customer experiences. Embedded finance allows customers to access the banking services they need anytime and anywhere by going to a website, social network, non-banking platforms, or mobile app. They no longer need to go to a bank to access banking services.

Challenger banks provide its customers with relevant digital features, easy-to-use displays, and attractive designs. These features help keep customers engaged, increase opportunities to sell other products, improve customer experiences, and have smoother customer transactions. Fintech institutions can apply these strategies to customize their services to the needs of their customers.

 

Thinking Beyond Transactions

Creating positive customer experiences and enhancing customer satisfaction can influence purchasing decisions. But, sometimes, it takes one bad experience for a customer to walk away from a brand they like. Fintech institutions can learn how challenger banks deliver a seamless customer experience by emphasizing speed, convenience, and responsive customer service. Clarity, transparency, and tech support are other ways for fintech institutions to enhance customer experiences seamlessly.

The goal of fintech institutions to be successful in a challenger banking environment is to have customer-centric business interactions. A fintech institution should focus on offering relevant digital financial services that cater to what the customer wants to buy rather than what the fintech institution wants to sell. Embedded financial technology can allow a fintech company to view a customer’s personal financial information to recommend appropriate financial products that can benefit their customer. They can safely do this without data breaches to ease the minds of their customers who have security concerns.

 

Taking Advantage of Banking Disruptions

Following the example of challenger banks is an excellent way for fintech companies to take advantage of banking disruption to improve their customer experience. Yet, established fintech institutions still have some advantages over challenger banks. These advantages include:

  • An existing customer base
  • A robust regulatory environment involving governance, legal compliance, and risk mitigation
  • Established capabilities and processes
  • Earned customer trust

These advantages form the foundation for an established fintech institution to transition to a challenger banking operation. Yet, fintech institutions need to assess how they can deliver the best quality of service in a digital format without sacrificing their foundational advantages. The digital format should go beyond websites and mobile apps to include voice activation, text messaging services, video chats, and other customer-preferred channels.

Using customer-preferred digital formats is an excellent way for a fintech company to use data algorithms to identify customer behavioral patterns. These behavioral patterns can help fintech companies find opportunities to develop and promote products that cater to the needs of their customers.

 

Adapting to Change

Fintech companies need to adapt to the needs of a new tech-savvy generation who conduct their personal and business affairs through social media and other online platforms. Older generations are also transitioning to digital sources to buy products and conduct business. Scalability and connectivity are essential for fintech companies to thrive in this environment.

 

How Can EMBank Help?

European Merchant Bank (EMBank) is a fintech-friendly challenger bank that can help fintech institutions expand their services in this expanding market. EMBank can advise fintech institutions on leveraging embedded finance technology to provide customer-centric financial solutions.

Established in Lithuania and licensed by the European Central Bank, EMBank provides a Banking as a Service offering, combined with Safeguarding Account, Business Account, and Accumulative Account types as well as payment options through SEPA, Swift, and Target2.

Please keep in mind that the above information has been prepared or assembled by the EMBank and is intended for informational purposes only. Some of the information may be dated and may not reflect the most current legal developments.

Please send an email to [email protected] to arrange a telephone call.

2022 Copyright © European Merchant Bank UAB. All rights reserved.
European Merchant Bank UAB is licensed by European Central Bank (License No. 3)
Swift BIC: EUEBLT22
Bloomberg Dealing Code: EUEB

2022 Copyright © European Merchant Bank UAB. All rights reserved.
European Merchant Bank UAB is licensed by European Central Bank (License No. 3)
Swift BIC: EUEBLT22
Bloomberg Dealing Code: EUEB