4 key barriers to challenger brand growth; a focus on retail banking

Gary Howes

October 24, 2018

According to the latest finance results from Maru/edr, reliability and trust remain the two main drivers behind consumer banking choices.

Yet, further results published just twelve months ago indicate that the finance industry is the least trusted sector amongst UK consumers – just 45% of UK consumers trust their financial institution of choice.

It means that customer loyalty within the finance industry is almost an oxymoron – customers stay with their banks out of necessity and convenience rather than any genuine affinity to a banking brand.

Offers and deals are almost always targeted at new customers – yet, even entry level business graduates will tell you that, while new customers are important, keeping customers on the books is where sustainable business growth derives from.

Challenger brands are growing but there’s still room for more

It’s why we’ve seen a wave of new brands enter the market over the past several years who are firmly putting customers front and centre of their offering. Challenger brands such as Metro, First Direct and Atom have all rapidly grown in the past three years as their promise of customer-centricity and ‘to do things differently’ both entices and retains customers.

Yet the retail banking industry is huge – and, despite their rapid growth, challenger brands still only account 15% of bank accounts held in the UK.

It suggests that, while these newer brands have witnessed almost enviable growth, there is still further potential available that challenger banks are struggling to capitalise on.

But what is stopping these brands growing further?

Four barriers to growth brands must overcome

Maru/edr Voice of the Customer research into the challenger brand market revealed four key areas businesses must focus on if they are to grow – fundamental basics, accessibility, personalisation and innovation.

Within the telecoms market for example, too often consumers believe that signal strength would be compromised by choosing a virtual network operator (MVNO).

Results showed that mobile challenger brands are missing out on new customers by not being bold enough when it comes to communicating the basics. While consumers are well aware of the flexibility and innovation brands such as Virgin Mobile, GiffGaff and Sky Mobile afford, there is not enough confidence surrounding the absolute basics of a mobile customer experience, such as signal strength and quality – and with mobile devices playing such a key role in our everyday lives, the results show that consumers simply are not willing to sacrifice the basics of an experience, even if it does mean more access to contract innovation and flexibility.

Brilliant basics vs differentiators

It reinforces the notion that brands must have the basics in place first before they can begin to wow and delight customers.

And we’ve seen very similar results within the retail banking sector – according to Maru/edr analysis, just one-third (37%) of consumers could be encouraged to switch to a digital-only bank but only if brands offer a secure, reliable and convenient offer.

Be bold with the basics

It demonstrations the need for challenger banks to communicate, not just the ‘breath of fresh air’ – the innovation, flexibility and accessibility on offer – but that the fundamental basics of banking and personal finance are in place.

After all, two thirds of consumers cite trust as the main driver of their retail banking decisions.

Download Breaking the Barriers of Challenger Brand Growth with Voice of the Customer