Is Your Financial Institution Feeling the Burn?

Building Exterior in sunlight

When the first so-called “challenger banks” like Simple and Moven appeared on the scene around 2010 they were heralded as “disruptors” that were going to put traditional banks and credit unions out of business.

Why? The asserted logic was that they provided a better customer experience, were more customer-friendly in terms of pricing (i.e., no fees), and had a lower cost structure (as a result of being branchless).

That didn’t come to pass, did it? You don’t get sunburned by being out in the hot sun for just five minutes. Give it a few hours, though, and… well, you know what happens.

It’s a good analogy for what’s taking place in the banking market of 2021. Challenger banks aren’t putting community-based financial institutions, like community banks and credit unions, out of business—but they are giving them “sunburns.”

Challenger banks aren’t necessarily causing increased attrition in traditional institutions, however. They’re creating new consumer behaviors and attitudes that threaten the roles that community-based FIs play and the relationships these institutions have with their customers and members.

In addition to the threat from challenger banks, the last decade saw an increase in growth and power among Big Tech firms, including Amazon, Apple, Facebook, and Google. This threat of Big Tech is no stranger to bankers: roughly half the executives at community-based FIs see Big Tech firms as significant threats.

There’s a shift in perceptions going on, however.

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Want to learn more? 

Download our latest research piece, Competing with Google Plex and Digital Banks: How Community-Based Financial Institutions Can Regain Their Mojo, for free today.