News that Tandem Bank has reached 500,000 customers is good for fintechs in that it shows consumers are looking at alternatives to traditional banks.
The bank, which offers customers a credit card account, savings products as well as an account aggregation app, only got its banking licence in January last year when it acquired Harrods Bank. At the time this doubled Tandem’s customer base to 21,000.
So to hit 500,000 a year later is impressive to say the least.
Ricky Knox, co-founder and CEO at Tandem, said it was set up with the goal of solving real people’s problems with money. “That means talking to our customers, looking at what milestones and goals they need our help with and building fair products to support them. Being fair is about making less money on deposits and loans and passing those benefits onto our community.”
Sounds good but the question I always ponder is what the customers are doing with challenger banks.
Gareth Lodge, analyst at Celent, said challenger banks have an interesting challenge ahead of them. “There are a large number of them, and from the statistics released from the Account Switching Service, it’s not clear how many of the challenger banks customers have moved to them, rather than opened a second account.”
“Furthermore, Open Banking arguably means there is even less need for customers to move their whole business to the challengers. One question then is the business model and long term aspirations these banks have. Do they wish to become main stream banks, or focus on where they can make money?”
David Bannister, financial services analyst at Ovum, said this is the big question.
He said how challenger banks measure success will vary and it is unlikely to be big profits. “There is not that much money to go around in the retail banking sector.”
He said some might measure success by bringing the traditional banks down, others will be happy with a modest return while others might see being acquired by a mainstream bank as a success.
They will have to be quick as the big banks will soon be able to do everything the challenger banks do everything the challengers are doing.
“Eventually some of the major banks will move in the right direction,” added Bannister.
Bannister said the banking sector is only at the beginning of the changes that are set to come. And he believes it is business to business banking where the big opportunity is for challenger banks and fintechs.
I must admit I agree with that. For challenger banks the SME market looks a huge opportunity while fintechs creating software for the operations of financial services firms, including Regtech, look to have certain markets cornered.