Challenger Bank Trends Report-2021

Analysis of 100+ challenger banks and incumbent and big tech offerings around the globe: successful models, predictions and how you should respond to this rapidly evolving and growing space

This 18-page report is part of the iValley fintech trends report series.

This report looked at the challenger bank and branded digital banking landscape that has dominated not only fintech but has seen entrants from big tech, ride-sharing platforms, and even some incumbent financial institutions with their parity offerings. We looked at 100+ startups worldwide, offerings from incumbents and tech firms, and studied their business models, segment focus, and make some predictions on how this space is going to evolve. This report has key insights for incumbents and startups on how to position and be successful in this rapidly growing space in fintech.

The key takeaways in the report:

  • Challenger bank adoption is growing rapidly across the globe. While the trend started in Europe and the UK, we now see rapid growth in the U.S and Asia.

  • Several different flavors include challenger banks, branded digital banks of incumbents, neoBank or end-to-end digital banks, and lifestyle applications that provide banking and payments.

  • In Europe and the U.S/Americas, startups like Chime, Varo, Nu Bank, Starling Bank, and N26 have found success, whereas, in Asia, the larger tech firms like WeChat, Jio are getting more traction.

  • The most common revenue models for 1st generation digital banks are transaction revenue (debit card interchange). We predict that the second generation models will be more segment-specific with embedded payments, lending, financial planning, and investment functionality with data monetization, personalization, and stable coins (crypto-currencies) playing key roles. Just like ride-sharing platforms created frictionless payments, banking, payments, and financial planning activities will get embedded in our everyday interactions, and challenger banks will lead that evolution.

  • Specifically in the U.S, after the big bank branded digital bank initiatives have all but failed, we predict that regional and community banks will launch or partner with challenger banks to expand the reach of their footprint.

  • Crypto-currencies and stablecoins will see broader adoption not just for trading like is supported in Square Cash and Robinhood but as an alternative to payment rails with stable coins.

The full report and the listing of all the digital banks included in our analysis are available to our clients. Click iValley Challenger Bank Trends Report to request a copy.