These Challenger banks are surfing the coronavirus wave

COVID-19 has turned the whole world on its head. Lockdowns and social distancing measures are impacting the way we hold meetings, buy groceries, and even manage our money. Usually, when it comes to money matters, people like to play it safe and stick to what they know. But with traditional bank branches closing, or at least, operating at lower capacities, consumers of all ages have had to learn how to use digital banking services. And as online banking goes from a neat little feature to the need of the hour, it’s Challenger banks’ time to shine.

Challenger banks are online-only banks with streamlined mobile apps and no physical branches. They have a smoother user experience (read: no more long lines at the bank), no overdraft fee, and unlike traditional banks, they don’t need users to hold large amounts of money as a minimum balance. What’s more, challenger banks like PayPal and Square’s Cash App are helping the government with disbursing stimulus payments to citizens with just a few simple steps.

And this, coupled with the stay-at-home advisories, have helped these challengers grow their user base exponentially since the crisis began. An indication of this is the number of reviews their apps have been getting. Between January and June 2020, the number of reviews for Current, Cash App, PayPal, and Stash increased by 50%, 74%, 33%, and 7% respectively.

Challengers are also seeing real economic benefits from the crisis. For instance, Current added more than 100,000 new users in both April and May- topping 1 million active accounts by June, while Square saw direct deposits on its service triple in April as people stored over $1.3 billion in aggregate balances on their Cash App.

Well, Challengers are well up to handling this surge in demand. In fact, most of them have managed to add considerably to their employee numbers. And we’re not just talking about recent upstarts like Current who have been steadily ramping up the size of their workforce anyway, but also established players like Chime, Varo Money, and Cash App. Since the beginning of the year, Current, Varo Money, Chime, Stash, and Cash App have increased their team size by 19%, 8%, 47%, 2%, and 43% respectively.

All in all, the pandemic has enabled Challenger banks to make their way into people’s lives and phones at a remarkable pace. It has offered them a golden opportunity to increase adoption, cement their utility, and capture market share from incumbents. Like the former Mayor of Chicago, Rahm Emanuel said “Never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”