How to Beat Challenger Banks at the Customer Engagement Game

User experience
Black Salmon/

In the age of challenger banks and digitalisation, incumbent banks are at risk of getting left in the lurch when it comes to customer engagement.

Challengers seem to have a permanent edge over the big guys, as they were able to integrate the latest technologies and engagement techniques into their business strategies right from the get go.

Meanwhile, legacy systems and regulations often hold established banks back from pushing forward.

There are, however, tactics that banks can use to get heard above the noise, engage their customers in a meaningful way, and retain customer loyalty.

Here's how to beat challenger banks at the customer engagement game:

Create a better UX

The single most important thing that drives customer engagement is providing a good user experience.

Gone are the days when customers would be willing to put up with clunky processes and layers of verification.

Expectations are miles higher now, and customers' desire for simplicity and ease of use is something challenger banks have tapped into brilliantly.

Moven, for example, a mobile-centric banking app in the U.S., allows users to transfer money to people via SMS, even if they're not Moven customers themselves.

Meanwhile, Barclays customers still need to use PINsentry card reader machines every time they want to send money to new payees.

Great UX: Moven lets customers transfer money via SMS, even to non-Moven customers

To win at UX, banks need to incorporate these three things into their UX strategy:

1. Digitalisation

Across Europe, 59% of internet users now do their banking online, and this number is constantly growing.

If legacy retail banks want to keep up, there's no doubt that they need to provide all of their services online.

This also means embracing new technologies like chatbots, AI and automation, which can make useful predictive recommendations and, in turn, render the UX smoother and more enjoyable.

Other types of digital media like interactive step-by-step guides, DIY videos and online support will go even further to improve UX.

Not only is digitalisation convenient for customers, but it's also beneficial to organisations because it means they can cut labour costs.

However, just because a bank goes digital, that doesn't mean they can neglect human connection altogether.

Banks should constantly be looking to improve their offerings by investing in new technology and hiring new talent who specialise in digital.

2. Mobile-centric

It's not enough to have a fully functioning website; today's most successful banks – and brands in general – are mobile-centric.

According to research by Facebook, millennials check their phones on average 150 times a day.

Evidently, it's crucial for banks to be mobile-centric so that customers can engage with them anytime, anywhere, on the medium that's most comfortable for them.

Designing a proper mobile-centric UX isn't just about making sure your website is mobile-friendly.

It also means spending time on creating an interface that is simple, clean, and easy to use, with some of the digital elements we touched on before, like chatbots and voice assistants.

3. Personalisation

Finally, in order to guarantee the best UX, banks must ensure that their onboarding, engagement and commercial strategy are customer-centric.

That means understanding that each user has their own individual needs and wants, and making an effort to cater to them personally.

According to a report by GFT, 68% of consumers stated that their relationship with their bank is purely a ‘transactional' one.

At the same time, 67% of respondents would be more likely to take out a loan or credit card with their current bank if they received personalised advice.

It's clear that customers respond well to having a unique, one-to-one relationship with their bank, rather than being treated as just a number.

One of the ways retail banks can provide this kind of personalisation is by being smarter about cross-selling.

By using data and technology to offer products that are actually valuable to customers, banks are bound to see a huge improvement in their customer relationships.

According to research, more than 50% of engaged customers still receive mistargeted communication, such as a product they already own or a service that isn't of interest to them.

With so much information and data available about customers, there's no excuse for missing the mark with messaging.

Eliminate friction

Simplicity isn't just a UX buzzword; it needs to be integrated into every single aspect of an organisation in order to enhance customer engagement and increase brand loyalty.

In essence, this means eliminating friction and streamlining processes so that customer interactions are always quick, seamless and easy.

Mobile bank Atom, for example, lets you open an account and make an initial deposit in mere minutes.

Eliminating friction: Atom Bank lets users log in with facial and voice recognition

It also lets users log in with facial and voice recognition, rather than having to use long, complicated passwords requiring a number and a special character.

And Monzo offers real-time balance information, unlike the big banks, which still only provide delayed notifications.

Here are some other ways banks can become more frictionless:

1. Reduce the number of bank branches… where necessary

Ask most consumers and they'll tell you that traditional bank branches are more of a hassle than a help, characterised by long queues, lengthy application processes and annoying bureaucratic systems.

Now that many banks provide a much more convenient mobile-based solution, the need for actual brick-and-mortar branches is declining at a rapid rate.

Indeed, digital banking has already overtaken branches in most European countries including the UK.

And yet, research has shown that customers still sometimes prefer to talk to an actual human about important financial issues.

So how is a bank to respond to this trend?

Again the key is to provide personalised services across all channels.

Banks can eliminate friction by reducing branches and replacing them with real-time online assistants.

That way customer interactions are positive, seamless and convenient, without being overly automated and thereby completely losing that human-to-human connection.

That being said, retail banks also need to make sure they find a way to reach those who aren't so comfortable with digitalisation.

Rural areas, for example, and customers without access to digital channels shouldn't be forgotten in the quest for a millennial-friendly UX.

It's worth exploring alternative face-to-face options such as RBS's and NatWest's mobile bank vans, which visit different towns every day to actively engage with hard-to-reach customers.

2. Optimise interactions

A big part of making customer interactions more enjoyable is ensuring that they are speedy.

Especially in this day and age, when the average attention span is just eight seconds, brands need to immediately capture the attention of their customers if they have any hope of engaging them in the long term.

Likewise, subsequent interactions should be short and targeted so that customers don't feel like their time is being wasted.

The commercial benefits of streamlining and optimising customer interactions are clear.

A 2018 case study found that when RBC introduced instant personalised insights on their mobile app, customers interacted with the app 20% more.

And when Citi Bank began offering a pre-login information feature on mobile, customers who used the feature accessed their accounts three times more than those who didn't use the feature.

When it comes down to it, the financial services organisations who offer customers personalised recommendations in just a matter of minutes will ultimately come out on top.

Be transparent

Incumbent banks have something of a reputation for having hidden fees and lacking transparency when it comes to the inner workings of their organisation.

By contrast, challenger banks make it a point to share everything with their customers.

Digital banks like Monzo and Starling have tapped into the modern consumer's desire for real human connection by putting their company values front row and centre.

Monzo, for instance, shares updates, financial tips and company goals on a public blog page, offering an intimate glimpse behind the scenes of the company.

In this way, Monzo is not just a faceless corporation but a relatable, personable brand that customers genuinely enjoy engaging with.

Transparency: Monzo’s blog offers a glimpse behind the scenes

If incumbent banks want to stay relevant, they need to do the same, and better, by making transparency a principal company value.

In practice, that means being upfront about fees and pricing as well as encouraging business leaders to be both visible and vocal.

Listen to customers, don't just talk

To truly give customers what they want, banks need to really listen, and respond accordingly.

This may sound like an obvious point, but you'd be surprised how many organisations neglect to properly collect feedback and use it to make decisions going forward.

Not only should banks be sending out surveys and conducting focus groups to gain insights into customer sentiment, but they should also be regularly engaging on social media.

Whether they're getting questions, comments or reviews, quick and accurate responses are essential to show that they value customers' opinions.

It's important to be available everywhere and at all times, as you never know when or where customers will provide the most useful feedback.

Keep your customers safe

One advantage that incumbent banks have over challengers is that they tend to have long-standing trust relationships with a wide customer base.

Challenger banks, on the other hand, are a sort of wild card in the eyes of the consumer, as they don't have all the security structures in place that traditional banks do.

This level of trust is something that incumbent banks can use to their advantage in order to boost customer engagement.

The best way to get ahead of challenger banks is by going above and beyond when it comes to security.

From biometrics to cryptology, secure video links to Optical Character Recognition (OCR), there are lots of new technologies banks can use to support their security efforts.

Bottom line, security should absolutely be a main priority, and banks should communicate that fact to their customers to help them feel safe, thereby encouraging brand loyalty.


An engaged customer is a happy customer, and a happy customer spends more money and stays loyal, so there's no doubt that customer engagement is essential.

Indeed, recent Gallup research found that retail banking customers who are fully engaged bring in 37% more revenue per year to their primary bank than those who are disengaged.

While it can sometimes seem like challenger banks will always have the upper hand when it comes to customer engagement, established financial services companies are by no means a lost cause.

The key to boosting engagement is interacting with customers via a channel they're comfortable with, listening to feedback, and providing personalised advice and services.

Only then do big banks have a chance at keeping their users engaged and happy.

Margot Peppers
About the author

Margot Peppers

Margot is our senior editor leading projects in SEO-focused content writing, social media strategies and optimising customer journeys. Prior to joining Strategy Desk, she was a Lifestyle Reporter for a major national newspaper.