Challenger Banks in Europe

Challenge Accepted

Digital challenger banks (new banks that compete with older established banks) have raised more capital than any other FinTech vertical in Europe. Mired in controversy, acquisitions, mega-rounds, and mega-write-downs, challengers are now headline news in tech/business press on a weekly basis.

European challenger banks

These European phenomena are enabled by new regulations that make it easier than ever to start a bank. Will this emerging breed of challengers displace high street banks? Read on to learn how:

  • Incumbents have paved the way for challengers through persistently low customer satisfaction. The largest UK bank has an NPS of -24, and the largest 2 banks in the Germany have an NPS of -8 and -22.
  • Both customers and challengers benefit from new banks that are built from the ground up. Challenger bank ROE is 3x that of incumbents, and rates offered to savers is on average 3x that of incumbents.
  • Challengers use fast on-boarding, pain point marketing, performance marketing, and network effects (rather than brand marketing) to onboard new customers at 1/4 of the cost of traditional banks.
  • The drivers of challenger banking could lead to horizontal banks that will cater to a specific market segment (e.g recent immigrants, freelancers) competing with incumbent regional players.

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