Challenger banks face an increasingly tough regulatory regime, one they must address on a par with the traditional banks, and where failure to comply is not an option. But the real challenge to the dominance of the incumbents will come via the successful implementation of a strategic and innovative business model.
The exploitation of profitable market segments, ones that are over-looked or underserved by the established players, could prove their making. Niche markets such as SMEs – with a GBP160bn lending opportunity – are already showing growth potential, as are specialist mortgages areas, such as buy-to-let, while the targeting of existing consumers is the preferred route of the supermarket and retail entrants.
Above all challenger banks must innovate. Offerings that are flexible, convenient and competitively priced will appeal to the early adopters whose capture is essential if account growth is to reach a tipping point. These include smart banking apps that provide exciting ways to leverage social media, and the continued improvement in the ‘customer experience’ via more flexible opening hours, easier account switching and faster loan decisions.
So the stakes are high and the challenges many. And with traditional banks flexing their muscle, competition increasing and the recent UK election results casting the shadow of an EU referendum, the only certainty is that the landscape will continue to shift.
A word about EM Group – we are more than just a high-level executive recruiter. Our dedicated challenger bank team has a genuine understanding of the industry, its evolving nature and, of course, its senior people. And we are committed to building trusted client partnerships for the long-term.