2023: the final countdown for incumbents versus challengers

Incumbents versus challengers. It’s a well-worn narrative that has dominated the entire fintech sector for years, particularly when it comes to banking.

The scene is set for incumbents to double down on their innovation agendas

The likes of Revolut, N26 and Starling continue to chip away at the big institutions’ market share, and some challengers have even begun reporting profits for the first time ever.

2023 will be a pivotal year to move the needle for or against. Ultimately, the scene is set for incumbents to double down on their innovation agendas, and failure to adopt a digital-first approach could mean challengers gain the lion’s share of the market once and for all.

Here are three key trends in banking that will undoubtedly determine customer stickiness in 2023.

1. Unlock digital lending 

On average, it takes an hour to fill out a digital lending application, with a further four weeks for the bank to verify data, process an application and issue an offer, meaning disbursement times can run up to three months. The result: customers abandon vital loan applications, while lending teams are overwhelmed with tasks that could easily have been automated.

Instead, traditional banks in 2023 can – and must – use the technology available to them to streamline this process. The approvals processes can be shortened significantly by providing the lending team with a 360-degree customer view, granular data analysis and streamlined customer communication. In turn, automation eliminates mundane tasks and allows underwriters to focus on applications that benefit more greatly from their attention and intervention.

2. Improve it or lose it

Earlier this year, Apple Pay soared past Mastercard in terms of transaction volumes, largely because of just how easy it is to use. Similarly, Amazon owes a significant part of its growth to its one-click purchase and same-day delivery options. If this tells incumbents anything about what to expect from 2023 it’s this: digital disruptors are here to stay and they intend to own the customer relationship.

However, such seamless journeys are not the norm in retail banking, where opening a new account takes a long time and involves many steps. This year is the final call for banks to put their customers at the centre of their approach and use data to create a more streamlined and useful offering.

3. Support financial wellness 

Understandably, as we approach a recession, banks have to de-risk to make sure that their business model can survive. However, unlike 2008, when the knee-jerk reaction was to cut credit if customers were considered ‘high risk’, banks in 2023 must find an alternative approach or put their own long-term survival in danger.

Instead, support to achieve financial wellness – defined by the ability to meet current and future financial obligations – will be essential in 2023. In this digital era, customers have come to expect the detailed and tailored analytics that challenger banks provide. App alerts which help them to stay on top of their spending, personalised offers for loans when crunch points with bills are coming in and tracking where money is going each month. If traditional banks don’t follow this lead and support their customers with financial literacy, not only will their business model be more risky, their customers will be more susceptible to jumping ship.

While each of these trends are influencing the banking sector in their own way, they are also working together. At the centre of all three is harnessing data and technology to improve the available products and customer experience. Failure to adapt in 2023 means the well-worn narrative of the battle between incumbent vs challenger may no longer dominate, if indeed the war is well and truly lost by the old guard.