The near future is bright for challenger banks when it comes to gaining stronger adoption among consumers: 68% of consumers say they are currently using a checking or savings account from a challenger bank or are likely to in the next three years, and 68% said the same about credit cards from challenger banks, per a report from Capgemini. And 61% said they currently have a loan or mortgage from a challenger bank or were likely to get one in the next three years.

Compared with the average consumer, those thinking about switching banks are even more likely to get financial products from challenger banks in the near future. Among consumers who say they are likely to switch their primary bank in the next 12 months, the chance of adoption increases.

For example, 83% of customers likely to switch say they are currently using a checking or savings account from a challenger bank or will do so in the next three years, 83% said they are using or would likely use a challenger bank’s credit card, and 77% said they currently have or would use a loan or mortgage from a challenger bank.

Interest from potential primary bank switchers provides a critical opportunity for challenger banks. While any chance for higher adoption is a good sign for challenger banks, the fact that consumers looking to leave their primary bank in the next year are particularly interested in challenger bank offerings is especially good news.

For challenger banks, getting more customers to use them as their primary bank is one of the main paths to raising profit margins — a major concern for almost all challenger banks. So elevated interest from consumers who may soon be in the market for a new primary bank puts the onus on challengers to design customer experiences attractive enough to seize the opportunity. 

Along with low cost, a primary reason consumers are turning to nontraditional financial institutions is that their offerings are perceived to be more customer-friendly. The top three reasons that customers say they switch to financial products from nontraditional FIs are lower costs (cited by 70% of respondents), better ease of use (68%), and faster service (54%).

Challengers are excelling at keeping customer fees and costs low, and their intuitive interfaces may stem from challengers’ digitally native nature. But a few notable challenger banks have recently run into issues that have disrupted their services, underscoring the particular problems that accompany digital-only offerings.

For instance, an outage suffered by US neobank Chime and the release of a BBC Watchdog Live piece about Monzo customers being left without access to funds for weeks while the neobank investigated and reported suspicious account activity. These incidents highlight the importance of focusing heavily on IT to ensure continuity of service and having a dedicated PR team that can communicate to customers in times of crisis.

Source: Business Insider