Around 20% of Britons are adopting the use of challenger banks such as Monzo and Tide, Smart Data Collective reports.
Big data is changing the future of the banking industry in countless ways. Savvy banking executives are looking for new ways to utilize AI and other big data solutions to offer more value to their customers and streamline their services.
This is leading to a new generation of banks. A lot of challenger banks are using big data to grow their market share in Britain and compete against larger institutions, such as Barclays.
With fintechs and challenger banks going above and beyond the requirements of consumers with digitally focused and user-driven app experiences, one company CEO says that now ‘high street banks are playing catch up.’
Nic Redfern became the finance director of Know Your Money in 2016 and three years later, the firm had a grown from a turnover £2.6m to £8.6m. Offering price comparison for cards, loans and bank accounts, he has seen first-hand the shift towards challenger banks over regular high street banks such as Barclays and Natwest.
There are a number of ways these banks are using big data to carve out their competitive edge, as AcadGild reports. These benefits include:
Using data mining to create a more personalized customer experience
- Mitigate the risks of fraud
- Reducing costly human errors
- Ensure compliance with financial regulations, the GDPR and other laws
Big data has proven to be very effective at solving many challenges in the financial sector. A growing number of challenger banks will use data initiatives to thrive.
From a digital standpoint, challenger banks offer a lot of benefits to the customer
Challenger banks are 100% mobile-app or online driven, also using big data and AI – and they do not have any stores or outlets on the high street. When physical credit cards are used, they are typically fluorescent or brightly coloured.
From a digital and technical standpoint, challenger banks offer a lot of benefits to the customer including notifications, automatic budgeting, no FX fees, no ATM fees and no monthly fees (depending on the product).
For people that do not have a desktop and want to manage all their finances through their phone, challenger banks offer a great experience, including the likes of Starling Bank that allows you to make quick text payments between friends and send friendly reminders.
With Revolut you can buy, exchange and sell cryptocurrency on top of other essential banking features.
Monzo can help you put your money into a savings pot, so if you budget £5 for lunch every day, but you only spend £4, it will put that change into a separate pot automatically.
Challenger banks will usually have a free model you can use, but you may get charged for certain features or you will have to pay for an upgrade. Monzo offers a free service, but you may be charged if taking money out abroad, meanwhile Starling Bank is free but charges when sending money abroad.
In some cases, it is a combination of paying monthly with the option to upgrade. Revolut offers a basic card for £5, which you can upgrade to premium for £6.99 or a metal card for £12.99 to give you access to airport lounges, baggage insurance and cashback on spending, amongst other features.
Big Data is the Backbone of Challenger Banks
Challenger banks are using big data to thrive in the 21st Century. There are a growing number of new financial institutions that will use data solutions to compete against larger counterparts. This will disrupt the banking sector in interesting ways.