When challenger banks arrived on the financial services scene in the mid-2010s, they earned a reputation for interrupting the banking status quo. Compared with incumbent banks and the CMA9, challengers offered a more streamlined, digitally driven and personalized experience, from offering Saturday banking hours, to providing water for customers’ dogs.
With their history of continuously innovating bold new ways to attract new customers, it’s no surprise that challenger banks seem ready to embrace open finance. In our recent study “The open finance paradox,” 76% of challenger bank respondents say their organization is turning to open finance to develop new products and services, and 94% believe open finance is important to their future success (see sidebar for more information on our study).
The challengers’ attitude toward open finance is very similar to that of the neo banks (which unlike challenger banks are 100% digital, with no physical presence), as both see open finance and its attendant innovations as major draws for new customers.
However, our research also shows a couple of stumbling blocks facing challenger banks when it comes to executing on their open finance ambitions. They continue to prioritize customer experience over open finance-based products and services, and they’re more likely than their competitors to let their security concerns get in the way of their open finance pursuits.