Challengers vs. Incumbents

Who will come out on top?

As we gear up for Banking Horizon 2016, we sit down with Sasha Yanshin, Managing Director and Founder of Strategy Desk (the key sponsor of our conference), to discuss his views on the growth opportunities for incumbent and challenger banks. Strategy Desk is a strategy consultancy that has extensive experience in helping banks and financial services companies enter new markets and develop new innovative propositions.

Banking Horizon (BH): Should traditional banks be seeing developments in financial technology as a challenge or a growth opportunity?

Sasha Yanshin (SY): I think that the current incumbents in the industry are still streets ahead of any challenger bank or small financial services start-up. The reason for this is that today banks are split into three broad categories:

  1. Traditional Players
  2. Some form of a spin off from these traditional players such as Williams & Glyn Bank and Tesco Bank (that spun off from the RBS platform), who position themselves as a challenger bank but in truth are a smaller version of one of the larger incumbents. They may have inherited some of the issues and system constraints of the incumbents but their smaller size makes them more flexible to incorporate change and innovation.
  3. New challenger banks/Fintech financial services companies, who have bold aspirations but compete with low levels of market share. The number of these is seemingly endless with as many as 30 currently waiting for a banking licence in the UK.

The current banks should look at the existing playing field and realise that whatever noise the market makes, they still have a unique opportunity to transform themselves and become the leading banks of the future. Those who fail to do so will fall. Those who turn themselves around to offer genuinely interesting propositions, which address changing customer needs and development in technology, will do very well.

BH: What are the key issues that challenger banks are facing?

SY: The current challenger banks that are doing best are still covering very low volumes. Customers are yet to be converted on mass to the benefit of switching away from a current account that can offer everything you want including overdraft facilities, customer service, additional products etc. Challenger banks are still building towards being able to offer these full service offerings due to capital and infrastructure limitations. Today’s challengers mostly attract young people, people in the industry and technologically advanced people, but until they can compete with a more complete offering, they will remain niche products albeit contributing significantly to driving the sector towards new ways of thinking.

BH: How do you think challengers can go about achieving mass market success?

SY: Challengers who will do well, are those who will sit down and rethink the financial services platform from the ground up. Today’s key retail banking products were designed in the ‘60s through to the ‘80s based on the infrastructure that existed at that time. Some of the reasoning for these systems staying the same is rational but there are significant challenges to designing new digitally native products. In addition, challengers will need to overcome market perceptions of being unknown brands and continue to offer customers positive experiences throughout the customer journey.

BH: How do you think consumers will respond to a fundamentally new product design?

SY: It’s all about the positioning and effective marketing strategies. Just like with some of the more prime products or new retail propositions, if you are able to make customers understand the benefits of these new products over the old tired constructs, they will switch in a heartbeat. Retention then becomes key through effective customer management strategies and building long term relationships.

BH: Where do you see incumbent banks improving in the next 12 months?

SY: Banks that will win new customers, grow portfolios and win big business are those that will focus on innovative changes for smart marginal wins in the short term. The banks that will do particularly well will integrate technology with existing platforms and innovate around their constraints. The more companies that realise that they can do a lot of what they want quickly, by teaming existing platforms with better data, rather than pumping billions into new data platforms will be able to challenge the challengers not only with brand and market position, but also with technology innovation and remain on top.


For a deeper dive into discussions like this, be sure you don’t miss out on the inaugural Banking Horizon conference taking place on 18th October in London. Strategy Desk is also sponsoring complimentary tickets for banks and financial services companies. For more information and ticket purchases please visit