Challenger Banks Now Face Challenge from Established Banks
File this one under “better late than never”, but a report sent our way from Fraedom suggests that established banks may have caught on that challenger banks are indeed a serious threat to their market share, their public perception, and at the end of the day, their bottom line. Established banks are readying their response, and that should make for quite a market going forward.
The Fraedom study makes it clear: 86 percent of bankers believe that challenger banks are a threat to their business. Indeed, nearly half of respondents, 44 percent, believe that challenger banks are the single most disruptive threat to current operations. Now that’s taking a threat seriously.
Considering how seriously the threat is taken, action is implied, and the study suggests action will be forthcoming and in a fashion that only might be considered overkill. Forty percent expected their banks to invest in new technology in 2019, while 34 percent expected updates to legacy systems. Legacy systems may be one of the biggest issues banks face; 46 percent consider legacy systems to be the single biggest impediment to growth that banks have seen yet. Not far behind that is 28 percent citing a general need to save money.
Fraedom CEO Kyle Ferguson noted “…Through the use of innovative technology, these banks have plugged a gap left by established retail banks and are acting as a stark warning to banks within the commercial space which remains open to similar disruption. If commercial banks are to compete, they must become more agile and adopt new technology platforms suited to changing needs of businesses, or risk being left behind.”
Granted, this isn’t exactly the back-to-the-wall response some might have expected here. With so many so clear that challenger banks are an existential threat, you’d figure you’d see more of a response befitting an existential threat. Still, banks had been hemming and hawing around this particular issue for years; the response to the challenger banks almost seemed to be “wait them out”, and that was a move that wasn’t going to get anyone anywhere.
While banks are invested in the status-quo projection that helps make them seem reliable and safe, the challengers’ innovation is likely to lure business away, and threaten established banks’ very existence.