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BSA Conference: EY expects ‘a lot’ of challenger banks to be gone in five years

  • 05/05/2017
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BSA Conference: EY expects ‘a lot’ of challenger banks to be gone in five years
A lot of the current crop of challenger banks will be gone or not needed in five years, the head of EY’s digital advisory service believes.

The consultant argued that many were having trouble building sizeable customer numbers and that they were too short term in planning.

Speaking at the Building Societies Association (BSA) conference in London, EY EMEA Financial Services head of digital advisory and customer experience Peter Neufeld agreed that challenger banks were exciting, building products and services which customers loved while making it easy to digitally sign up for them.

However, he believed this was likely to be short lived and noted how difficult it was to build a balance sheet to support selling mortgages in the current market.


Spending and lending

“I think they struggle to acquire customers at scale and to be honest they are really a spending and lending proposition – they want to chase your current account balance to zero and then lend you some additional money to spend,” he said.

“There might be some of these guys in the next few years that reach out and build their full portfolio capability, they’re ambitious, a lot of them have a very ethical view on the market, they want to help people make great financial decisions. But I think it’s really tough and there might be a lot more challenger bank propositions on the market than in five years we’re going to need or see.

“A lot of them are also very short term in thinking – I would argue they’re influenced by venture capital, private equity, they have very different time lines in terms of what they want to see in terms of growth and I think these business models are shifting,” he added.

However, Neufeld noted some examples of businesses which were doing innovative and attractive work simplifying the banking process, and making it an easy and satisfactory experience.

“There are some models out there which are really interesting, challenging traditional financial brands in engaging with their customers,” he added.

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