Fintech 6 July 20

What does it take to build a challenger bank?

Matt Rowntree
By: Matt Rowntree
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 A common feature of most successful challenger banks is that they don’t try to do everything – at least not immediately, and not on their own. 

Instead, the best challengers build out their offering by partnering with specialist fintechs, or choosing from the vast array of off-the-shelf financial services products on offer. This is a marked departure from the traditional model of many large, established banks. 

As our friend and renowned financial services blogger Chris Skinner puts it: “In the open-source, open-banking world, you have thousands of fintech start-ups who each do one thing brilliantly, competing with large banks that do a thousand things averagely.”

In order to grow at scale and meet the ever-increasing demands of customers, it’s virtually impossible for challengers to go it alone. They must instead rely on a wider fintech ecosystem. Luckily, there’s never been a better time to collaborate in financial services, with the growing trend towards modular integration and developments such as open banking. 

The building blocks of a challenger bank

The centrepiece of any new bank is its core banking platform, which effectively orchestrates its different processes – relationship management, transactions, lending, deposits etc. 

Below that, you have a set of specialist functions, which can include payments, accounting, compliance and regulatory reporting. 

Many of the most successful challengers quickly realised that it is impractical to try to deliver all these elements in-house if you want to get to market quickly. Instead, they embarked on a series of collaborations with best-in-breed fintechs. 

Collectively, these collaborations form bigger fintech ecosystems. At the heart of these ecosystems are organisations like Mambu, a fully composable, cloud-based banking platform. It also has a connector layer, giving its banking clients access to specialist functions delivered by third-party fintechs. 

Drill down further and you will find that these specialist fintechs have their own partnerships and supplier relationships. 

At Currencycloud, we partner with core banking platforms, and are building out an ecosystem in the card payment space (working with partners including Visa, BIN sponsors like Transact Payments, and processors such as Carta). Many of the partners we work with also partner with each other. Everything fits together like a jigsaw puzzle. 

Kriya Patel, CEO, Transact Payments Ltd comments: “TPL’s services are all underpinned by partnerships and collaborations. A key to the success of our relationship with Currencycloud is finding like-minded, committed and relevant experts in our collaboration model that allows each business to seamlessly transition between each other through the way we work and the way we trust each other’s capabilities to deliver value to our partners.”

Richard Wray, Managing Director, Carta Worldwide comments: “We are very excited about this partnership. Carta’s innovative processing capabilities collaborating with one of the most reputable platforms in the industry will enable us to deliver some real change to customers across the world.”

Partnerships are the key to growth and scalability 

If you want proof of the power of collaboration, a prime example is challenger N26, which has grown rapidly in the past seven years, particularly since its migration to Mambu. You can only grow at that lightning speed if you are working with the right technology partners. 

For any new challenger today, the key is to build a platform that is reliable, scalable and cloud-based, and to work with best-in-breed providers, such as Currencycloud. 

While international payments is our bread-and-butter, we see ourselves as being part of something bigger. Our vision is to change the financial services landscape, and achieve more than we could on our own, through collaboration.

Collaboration works best when each partner can focus on what they do well, and the partnership is entirely aligned behind a common set of goals and objectives. When that happens, it’s a win-win for everyone – for challenger banks, their fintech partners and best of all, their end customers.

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Interested in learning more about our partnerships – get in touch!

Matt Rowntree
By: Matt Rowntree

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