How can Financial Institutions win against challenger banks?

There’s no easy answer to this, but there seems to be three common areas where challenger banks have the edge on their traditional banking counterparts: data, digital and social. Crossing over with our blog on Social Media Influencer Marketing, the ability of challenger banks to communicate a more humanized brand message is a large part of their success.

The industry disruption presented by ‘challenger banks’ is a very real threat to the profitability of traditional financial institutions. Chris Nichols, Chief Strategy Officer for CenterState Bank considers this power part of the reason customer retention has to be the focus for financial institutions: “When someone like SoFi takes a customer from us, it’s much harder to get them back,” Nichols says. “This group presents more of a long-term, existential, threat.”

Which kind of banks are financial institutions competing with?

Take the challenger bank, BankMobile. Not only have they merged media, partnering with T-Mobile to deliver their T-Mobile Money banking app, but they’ve targeted the next generation of digital bankers. Their clients are overwhelmingly college students, and they’ve managed to tap into the language and habits of young people to build an emotional connection and, as a result, trust.

For example, BankMobile’s latest venture, VibeUp, is a fee-free mobile checking account which focuses on budgeting features and capitalises on the country-hopping habits of college students: ‘Say adios to ATM fees, thanks to a worldwide network of over 55,000 fee-free Allpoint® ATMs.’ 

Most distinctively though, they’ve gamified managing finances. With the Passport Program, customers receive ‘stamps’ for good financial behavior, smart money management and academic achievement. Finally, you can enter your stamps into a sweepstake for the chance to pay off your student loan debt. Tempting, right?

So, how can FIs ‘vibe up’? 

According to Ron Shevlin, they don’t need to level up to compete; they just need to catch up and collaborate. Challenger banks may be the ones innovating, but Financial Institutions have access to capital and the ability to scale up that challengers don’t. Oftentimes, challenger banks and fintech companies will have to enlist the help of FIs to access the big data they need to break into certain sections of the market. This provides a golden opportunity for FIs to execute and deploy instead of running out of steam trying to innovate. 

Perhaps there is no ‘winning’ for FIs when it comes to competing with industry disruptors, but by offering their services and insight, they can make challenger banks work for them, not against them.

M6 Marketing's ReImagine Checking® addresses the fundamental sameness of checking products by restating the product attributes to highlight the FIs own brand, along with outcomes and benefits that matter to today's consumers. No changes to the product or core are required, and there are no on-going fees, giving financial institutions a game-changing option to improve checking account acquisition. When joined with Community Engagement Marketing (CEM) to build visibility and engage potential customers outside of the paid media marketplace. M6 Marketing helps financial institutions target and build engaged communities of customers. Let’s talk if you are interested in learning more.