BANKING
It will not have escaped anyone’s attention that the banking industry is changing rapidly, and what was normal ten or twenty years ago is potentially wholly different. Branch closures, the rise of online shopping and home delivery into the mainstream, and various other factors mean that consumer loyalty to the big brands is not what it once was.
Deciding to switch is nowhere near as daunting as it once was, and there are various systems and incentives in place to make it as seamless as possible. What can make the concept more challenging is the sheer number of banks to choose from. For those with a bank account they have held for decades, the distance to the nearest branch probably played a significant role. Today, such a consideration is near the bottom of the priority list. Indeed, anyone that opts for a challenger bank will discover that the concept of branches is virtually non-existent.
However, not all of this new breed of banks is created equally, and it makes as much sense as ever to research what each bank can offer and how it relates to your financial priorities.
- Types of Account
It would be easy to assume that any challenger bank would offer checking and savings account as standard, as that is what most people are used to. However, such is the relative ease with which a bank can enter the market today that there are numerous opportunities for specialization.
An attempt to set up a Bank of America or Citigroup today would be challenging enough to be considered impossible. However, challenger banks are quicker, cheaper, and more streamlined. That has made it possible for different brands to emerge that specialize in various types of accounts.
Nevertheless, if checking and savings accounts are your priority, it is safe to say that there is no shortage of options. You can rest assured that no matter what you expect from a challenger bank, there will be multiple options out there, and no research will prove fruitless.
- Overdrafts
The new breed of banks will often try to emulate their established counterparts in terms of features, then build from there. Overdrafts are every bit as commonplace at digital banks as more traditional ones, and their availability is often considered in the same way.
However, challenger banks set themselves apart by taking familiar concepts and doing something different. Research pays off once again, as the idea of the same overdraft facility for everyone no longer makes sense. Some digital banks offer automatic overdrafts with no fees, while others require an application. Depending on your financial requirements, the fee structure and size of the overdraft will be the main priorities, but those requirements will change based on individual financial circumstances.
- Fees and Penalties
Challenger banks are businesses like any other, and while many have entered the market to offer unique opportunities to customers, they still exist to make money. One area in which they still have plenty in common with their traditional rivals is that fees and penalties represent a significant income stream.
With that said, while it is not always the case, these fees and other costs are often substantially lower. Without a network of branches to support, and technology reducing operating costs significantly, it is not overly challenging to potentially find a better deal through a challenger bank than through an aged competitor.
It is worth considering which of the available features available from each bank matters the most and allowing that to influence the overall choice. If you need to build your credit rating, it can be worth investing in credit building functionality should it prove affordable. If you frequently use ATMs to withdraw money but keep your account in credit, a challenger bank that automatically refunds fees for doing so would be more valuable than one that does not do so but includes a free overdraft.
- Support Hours and Availability
With branches seemingly closing every month, the thought of heading for a chat with the bank manager couldn’t be further from most bankers’ minds. It is not just all about phone support now either, as most challenger banks boast support desks that operate around the clock, ready and waiting for live chat conversations and emails.
While banks, new and old alike, are leaders in online security, things can go wrong. From something simple and easily solved like a lost card to more severe issues like fraudulent transactions, it is not unreasonable to expect an instant response. Once again, it is possible to research opening hours before committing to an account, and anyone that seeks the reassurance of 24-hour operations can find it.
It’s also important not to underestimate how much some banks enable customers to do for their security, usually through a mobile app. In days gone by, a lost card meant canceling it and requesting a new one – even if the owner felt there was a chance of finding it. Nowadays, customers can put a temporary freeze on their card without canceling and awaiting a new one. The levels of control increase all the time and are worthy of consideration by the security conscious.
- Unique Extra Features
With all things considered, challenger banks are competing with established brands and the hundreds of other digital options out there today. While every bank needs a specific range of features to meet the most basic banking needs, innovation and technology development are at an all-time high. Just as with any industry, offering something that nobody else does is a great way to stand out in the crowd.
Features rarely remain truly unique for long, as the competition is always on top of what is working for others. However, relative uniqueness matters and is directly influenced by an individual’s banking needs. Some challenger banks enable stock trading in the app, while others provide saving pots and single-use debit cards.
The pace of change means that there is not and likely never will be a single challenger bank that offers everything the competition does. Different features carry more weight for some prospective customers than others, and no matter what your ideal digital bank looks like, there is every chance that the perfect option is out there.
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