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How Challenger Banks Are Innovating During the Pandemic

Challenger banks have used the pandemic to reiterate their mission of supporting customers’ financial needs. Portions of their websites are dedicated to general advice, cataloguing government schemes as well as their involvement in them. Many also invite customers to reach out if they experience financial difficulty, presumably to offer bespoke support.

Beyond these basics however, some are seizing the opportunity to develop novel products in response to emerging needs. As the adage goes, necessity is the mother of all innovation. To that end, here are three initiatives that stand out.

Starling’s Connected Card

For certain members of society, the pandemic exasperates struggles with common errands. The elderly for example may fall into this group; some may not be able to rely on friends or family to help with simple tasks like groceries or other necessities. They also run the risk of exposing themselves to the coronavirus if they trek outside.

Starling Bank offers a solution to vulnerable senior citizens or anyone else in need of assistance from others. Its “Connected Card” is a supplementary debit card that account holders can give to a trusted someone offering a helping hand. This spares the exchange of sensitive bank details or cash. In addition, the built-in security features limit opportunities for abuse by imbedding the card with a spending limit, separate pin as well as limiting the functionality at physical stores only.

Said the bank’s founder Anne Boden:

We know that getting in groceries and other essential items is a challenge for those who are self-isolating during the coronavirus emergency. So, we came up with a solution to help our customers pay for supplies bought for them by trusted friends and neighbours without the hassle of transferring money or handling cash.”

The idea proved popular. So much in fact that it was quickly replicated by UK high street incumbents Natwest, RBS and Ulster Bank. Imitation is the greatest form of flattery as they say.

NuBank Feeds People and Pets

Support during trying times shouldn’t be limited to banking services. With numerous government and private efforts to address financial stress, other needs also deserve attention.

Brazilian challenger NuBank took that approach to heart when developing its outreach program. Following-up on a spontaneous message to check on the mood of its customers, the company set money aside from its marketing budget and efficiency exercises to create a fund. It then partnered with technology companies to craft support options for a variety of essential services, including:

  • Food orders placed through on-demand delivery apps Rappi and iFood;

  • Telehealth consultations with doctors at Sirio-libanés Hospital in Sao Paulo;

  • Pet supplies ordered on; and

  • Therapy sessions on Zenklub.

While the fund is capped at roughly US$3.8 million, the measures will nevertheless be well received as the company rides a wave of recent successes. With remarkable customer growth, an eye-watering valuation of 10 billion and expansion into new countries, the goodwill from these gestures will bolster its brand awareness. It’s worth noting that NuBank enjoys a strong reputation in its home market where 80% of customers are sourced from unpaid referrals.

Chime Fast Tracks Government Support

As the US economy came to a grinding halt in the aftermath of the coronavirus outbreak, a bi-partisan relief effort quickly gathered steam. It passed unanimously through the Senate before being signed into law by President Trump two days later. Known as the Coronavirus Aid, Relief, and Economic Security Act, or the CARES act, the package was worth $2.2 trillion and provides $1,200 cash payments to adults.

Anticipating the financial bind some may come under waiting for the stimulus to arrive, challenger bank Chime devised a way to provide funds quickly. To make the early payment, the San Francisco based company leveraged SpotMe, a feature in its chequing account which provides a free overdraft of up to USD$100. It then randomly selected a thousand customers to give them an advance on the stimulus payment. In the end, about half took the offer claiming on average between $150 to $300. The program was later extended to another 100,000 but with a $200 cap.

If the feature isn’t impressive enough, it’s worth noting the risk Chime took introducing it. As the advance is not a loan, the bank has no recourse for non-payment. In addition, nothing prevents a customer from forwarding the amount to an account at another institution. Nevertheless, Chime seemed to benefit from the goodwill gesture as CEO Chris Britt claimed March was the bank’s best month on record.

The Point Is

There’s value in these initiatives. While cynics may argue that the features fall within the realm of gimmick, it’s nevertheless certain that customers will remember them once the crisis subsides. This in turn will translate to greater loyalty, a key issue in the context of a ferociously competitive market for deposits.

All thoughts are my own.


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