Eight challenger banks traditional institutions should worry about

An onslaught of so-called "challenger banks" continues to disrupt the competitive landscape in the financial services sector. Also known as "neobanks", these digital-first players are aggressive, app-driven, CX-obsessed upstarts looking to tear up the banking industry.

In the U.S. today, there are at least 40 digital-first challenger banks. The U.K. has more than double that.

Now granted, you can debate what is and isn’t a challenger bank until you’re blue in the face. Does it mean mobile-only? True checking accounts or merely payment tools? Are they backed by FDIC insurance? There is no one definition, but honestly, it doesn’t really matter.

Regardless of how you slice it, the overarching commonalities boil down to this: These entities use the power of innovation, digital technology and data to disrupt and redefine “banking as usual.” They challenge the status quo.

Collectively these upstarts definitely have bankers on edge, and some are starting to mess with bankers’ heads in a big way. For instance, Chris Nichols, Chief Strategy Officer for CenterState Bank, says Marcus by Goldman Sachs poses a real threat. He also closely monitors challenger banks N26, SoFI, Varo and BankMobile.

 

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