An open letter to the challenger bank

Duena Blomstrom composes a letter to the challenger bank at large. Image: Freepik
Written by Duena Blomstrom

Duena Blomstrom composes a letter to the challenger bank at large, and pulls no punches in assessing the ins and outs of what’s involved.

Dear Challenger – Pull up a chair and let me get you a cuppa. This could take a while. Let me start by saying I’m here to kill some of your dreams. I’d apologize in advance, but it’s necessary cruelty. You can hate me all you like, but we both know this is not about me and not about you, but your consumer.

I buy it that you love your consumer already, Challenger, I really do! I think you’re honest in your pursuit of a better way for them, and I know you’re right to be indignant in your assessment of all the banks you’re challenging on their behalf. I believe that you’re feeling less like a new business owner and more like a newly minted social worker. I’m not doubting any of that enthusiasm. Go dreamers, because heaven knows the consumer needs all the help they can get, but they won’t get it unless we clarify some terms.

You don’t need a pen, you can take notes on that iPad. The terms we’re here to discuss are almost the opposite of my usual easy-to-mistake-for-fluffy ‘let’s think of people’s feelings’ stance, and that’s because you, my dear Challenger, have nearly got that right. You get what millennials want, what busy professionals are frustrated with, how to make cool experiences that delight, and you use fancy and oh-so-delicious terms such as ‘invisible banking’, so I’m proud and hopeful. We’re here to talk about four things without which you can forget it – pack your bags and go back to the incumbent you want to escape. These four things are: core technology, product, and two key business terms, adoption and retention.


Get your arm in and tell me if you feel anything shaped like a sturdy transactional categorization engine
When I say technology, I need you to tell me what you bought to make this happen. Or built. No matter. Open that box, what does it have in it? A core banking system you say? Great. Are you anxious because you bought what you used to think you hated in your other job, yet you’re not sure it will hold up to scrutiny? Don’t be. They’ll get smarter with you, so pull them along. You’re worried because you’re not positive the mainstream tech you’ve pulled together in your own makeshift box may make it disintegrate?  That’s possible but you’ll deal with it. Either hating your back-end provider or wondering if your hacks will hold is part and parcel. Welcome to being a banker. I’m here to ask you to look for two things in that box. Get your arm in and tell me if you feel anything shaped like a sturdy transactional categorization engine, and something that feels like an automatic aggregation framework. Found them? Marvelous. We only need to worry about some of the other things now. You can even skip straight over product, as those two will keep consumers in love even if you have none.

Wait, what? You only found one, or worse still, neither? Uh oh, Houston we have a problem. We don’t have a minor, easy-to-fix-in-time problem. We have a major one that will not let us get those two magical things called adoption and retention, because you know what, you won’t be able to show the consumers what they did with their money and what they did in the places they spent it in, because you do know in your heart of hearts that no matter how many new features you think of, and how amazing your APR proposition is, you won’t be anyone’s primary bank, right? At least not to start with. Not for a long while, and they need to kinda look at the entire picture of their finances or they won’t come by. You need categorization to show them what, and you need aggregation because the where happens in several places and primarily elsewhere.

Yes, yes, finding (and affording) those bits of technology is nearly impossible, and your provider had no such thing, and utterly impossible to build so your team and your other technology providers said you’d be fine without them, that you can wait for the change in legislation to add it easily later on once all the APIs land in your lap. Or better yet, wait, did they promise you that your sheer awesomeness will make you the primary bank of choice to your consumers immediately, and even more, that if you gave them aggregation, you wouldn’t force them to make a choice? You’d be the spouse ready to accept an open marriage rather than threaten to take its awesomeness out of the equation if full exclusivity and eternal fidelity isn’t restored. They will have to recognize your value and promptly close their HSBC Premier account, or just never get that doggy bone in a Metro for crying out loud!


Please settle down. I can see it, you’ll be their everything, got it? Which brings me to product. What are we giving them? Beautiful, funky cards. Mustn’t forget those. Savings, of course. That’s easy, and that’s where all the money’s made. Loans, as you’ll maybe partner with some alternative lending fintech unicorn. P2P payments (with a twist), as they all need to split bills, and the UK has no Venmo. And of course current accounts, where they will see all this and sort what they’re really left with, pay bills and get their salary in. You can wait with mortgages or investment or even SME awesomeness if your target is the main street consumer. Wait, what? No payments? It’s OK, we can integrate Apple and Samsung later – maybe you’re right. No lending, as it’s too much hassle for now? OK, I’ll stop you right there because if what you’re about to say next is no current accounts either, then Houston we have an even bigger problem and not a fixable one.

{Sigh} Didn’t we just agree you want to be their primary everything day one, and that’s why you’re not getting aggregation? Well, what do we do now, because if you don’t give them a way to get paid (and pay), they’ll have to get it elsewhere. Surely you understand that? Dear oh dear, let’s see what we can still do to save this.

Adoption and retention

How many people need to move to your new bank to make this work? How many of the other 26 new banking propositions will you have to wait out?
Adoption first – look into the coffers, please. Don’t tell me what you see. This is an utterly rhetorical question. Deep? Loads of pounds left after buying that back-end, hiring those ex-bankers and paying for that license? Enough for the reported, disputed and dreaded cost of acquisition? What did you budget for it? £50? £100? £500? How many people need to move to your new bank to make this work? How many of the other 26 new banking propositions will you have to wait out? Would getting as many customers as the only other challenger be enough? I’m referring to Santander. Dispute it all you like, but they kinda do that now in the UK. Of course, you also have to wonder, would their business model work in isolation with only two million consumers, or is it just because they own the rest of the banking universe elsewhere that they do well? OK, maybe not two million, but surely you must be shooting for a million consumers in three years? No? 500k? OK, 500k – let’s see what that is for a conservative 50 quid a pop. Wow, that’s still a lot of dough. Are we good? Great. Now all we need to worry about is how to keep them once we get them – retention. A few million short? I’m afraid we’re hitting a dead end.

See, this is the deal – it’s a simple equation – if you give them the needed technology and a full stack of product, then you don’t need to buy them. You’ve brought them so much value that word will eventually spread and you’ll quickly grow organically when the entire customer base finds out how you’re the holy grail of banking. But that’s not your plan, is it? So you need to afford acquiring these customers to get any adoption to your semi-valuable-but-shiny-features.

OK, let’s imagine you’ll go out and get a few more tens of millions to either buy more tech or pump up your product offering before you go live, or pour it into aggressive TV campaigns and get some people to try you after we did. Now all you need to worry about is retention; that they stay; that you build that mythical trust; that you keep them delighted, except you don’t because this part you have right; this is the quality of the experience and that’s going to be there. If you sorted the tech or the product and you managed to get adoption, you’ll get your retention. You’ll be awesome and make them fall in love and want to stick around. That will be easy and magical.

It’s only here that you can count on the social fun; the gamification; the telepathic authentication, the new free-2-spends, the causes, the offers, the notifications, the trading simulations, the savings ladder boards and all the other exciting, hopefully addictive features you dreamt that will grab them by the heart. But to get here, you need to have sorted the steps above.

So, dear Challenger, to survive you can miss one of these three but not all three irrespective how much awesomeness you packed into the experience. Either strong tech (categorization and automatic account aggregation) or compelling full product stack (current accounts being a sine qua non condition to engagement), or money for adoption (loads and loads of it so you buy these people and then pray to the gods of banking they stay till you fix the other two). Pick your poison.

That’s to survive. To thrive and succeed, you need it all: tech, product, adoption and retention, aside from your undoubtedly beguiling experience.

I’m sorry this was upsetting, and please don’t think it’s too late. You can still change course and get yourself in shape, of course you can. You’re not one of those old, stuck mammoth banks. We all need you to succeed. We really are rooting for you and would like you to see you do well for all our sakes.

Signed – A Hopeful Future Customer.

This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. You can read the original article here.

About the author

Duena Blomstrom

Duena Blomstrom is an independent digital banking consultant, an entrepreneur and VC, a mentor for Startupbootcamp and Techstars, an uncomfortably opinionated blogger, and a public speaker at industry events.

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