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Challenger banks are dead, long live challenger banks
Customer experience is at the heart of the battle between incumbent and challenger banks. Despite the perception that challenger banks are winning this battle, a superior challenger bank customer experience presents itself in only a handful of important areas when it comes to customer needs. Moreover, a view of the entirety of today’s customers’ financial needs reveals no winner. Traditionally, six essential needs of customers have been recognised: onboarding, payments, saving, investing, lending and support. The challenger bank provides a better experience in only three: onboarding, saving and payments. Challenger banks are lacklustre in customer support and have minimal to zero experiences or products to fulfil the lending and investing needs of customers. Looking to the future, a new need is beginning to arise: data-driven insights. This seventh need will serve as the new battleground for incumbent and challenger banks, with the former in a better position to fulfil this need. Incumbent banks should therefore prioritise the creation of data-driven insights in order to stand up to challenger banks. This paper explores how challenger and incumbent banks compare with each other in providing exceptional customer experiences in six important needs. It identifies a new need, which will become pivotal in the next generation of digital transformation. It begins with a brief overview of customer experience, namely what characteristics are required to delight customers. It then identifies six important customer needs. Next, it outlines each of these needs and verifies how challenger banks have or have not provided a good customer experience. Lastly, it introduces a seventh core need, data-driven advice, analyses incumbent banks that have a head start in offering exceptional customer experiences in this need, and discusses how they are advantaged in their ability to win back customers by fulfilling this need.
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Meaghan Johnson has more than eight years of experience supporting banks, FinTechs, technology companies and management consultancies in customer experience, product development and strategic research. With a full-scale research background and a wealth of experience in digital financial service best practices, her works include product development, UX design, competitor analysis, customer interviews, mystery shops and strategy research. Currently based in Berlin as an independent consultant, Meaghan has worked with dozens of financial institutions worldwide from the UK, Africa, Europe and North America. She enjoys speaking at events where she can share best in class examples of customer experiences and also helping large organisations take a customer-first mentality to product and service development. She is a Senior Advisor at EFMA, a Partner at Pacemakers, Podcast Host for Breaking Banks Europe and TimePledge.