Technology's Role in Challenger Banking

1. Challenger Banking in Greece

1.1 Introduction

The rise of challenger banking is an awakening call to the banking industry where large and more established banks witness competition from relatively small banks. Challenger banks can be defined as small and recently developed retail banks across the United Kingdom, which are believed to have staged competition against the established banks. Some of the banks were created after the era of divestment from other banking groups. Most of the challenger banks detached themselves from the modern information technology manifested in the online-only operations. The technological milestone targets elimination of costs, as well as complexities attached to traditional banking. This is accompanied by the irreversible technological changes adopted by most of the financial institutions, and the change and growth of the economy and customer behaviour. Notably, the current trends are impacted by the economic influence, technology, and consumer behaviour, which form powerful drivers when integrated. The seismic change or effect of technology is totally changing the structure of the banking industry, and creating a market gap for the new entrants in the economy. The dominance of challenger banks in Europe seemingly attracts the banking industry in Greece as well. Based on this prerequisite, the discussion will focus on the qualitative and quantitative analysis of the banking market in Greece. This will also be accompanied by development of a model that will be compared to other models used in other European countries like the United Kingdom.

1.2 The Emergence of Challenger Banks in Europe

The history of challenger banks mainly revolves around the turn of events in Europe, and specifically in the United Kingdom. The emergence of challenger banks has a direct link to the 2008-2009 financial crisis, which had an impact on the European market. Most of the developed markets, at the time, suffered hefty losses of trust and incremental reforms have consistently been realized over the time. The need for lower interests and a banking culture that called for a simplistic Facebook or Google-like experience heavily motivated the emergence of the entrepreneurial-led banking revolution (Gomber et al. 2018). Before the wake of 2016, the customer-centric and technology-driven institutions fostered a transformation of the banking landscape across the entire market. The institutions came to be later identified as the challenger banks and their dominance has been accredited to the fast-moving services and convenience. In United Kingdom, the country realized over 30 challengers who applied for the banking licence. However, most of the licences were granted between 2010 and 2015 by the regulators in the banking industry. In the year 2016, Masthaven Bank acquired the first banking licence followed by Starling Bank and Monzo Bank. The trend has also been spreading towards Singapore, China, France, the United States, Mexico, Australia, and Germany among others. Continue your exploration of Energy Efficiency in Construction with our related content.

Following the market dynamics, and advancement in technology, challenger banks have garnered an irreversible momentum for the past 5 years. This has also attracted the interest of non-banking players such as Sainsbury and Tesco who have established loan and credit card facilities. Most of the challenger banks offer good interest rates, personal contact and innovative products, which are rarely realized by the high street banks. In United Kingdom, the growth of Fintech has been seen as an enabler that provides interplay between technology and finance (Chuen and Deng 2017). Based on Fintech, market players are encouraged to offer innovative solutions to most of the financial services offered across the industry. The disrupter challenge the obsolete business models, and secures market shares based on the digital transformation realized in the growing financial industry. Fintech, for the past 10 years, has witnessed a significant growth supported by the heavy investments drawn from the venture capital funds across the world. During the third quarter of the year 2016, the Fintech industry raised over $2.4 billion in form of capital. This shows how the digital transformations have consistently appealed to customers and specifically the millennial generation (Gomber et al. 2018). The industry covers diverse areas including wealth management, virtual currency, online lending and banking. The services are enabled through the websites, personalized apps, branches and a combination of internet and mobile technologies.

As much challenger banks try to put up a competitive environment, some of the established service providers have also opted to launch Fintech products in the market. For instance, Clydesdale Bank and the Yorkshire Bank launched a mobile banking app known as “B” that supports commendable spending habits and enables the users to make better and affordable budgets. Other incumbent banks are also establishing cooperative relationships with some of the Fintech start-ups as one way of soliciting stakes in them and benefitting from the industrial growth. For example, the Spanish BBVA spent over £45 million in purchasing 29.5% of the all the shares accrued by Atom Bank, which is an online lender in the UK. This is because BBVA noted the advantages of the Fintech start-ups, which include low costs of operation, convenience and the ease of accessing the services. The emergence and rise of challenger banks is one of a kind. With time, challenger banks have attracted noticeable interests from even the key players in other industries, apart from the banking industry. Most recently, more than $500 million were invested in the European Union digital banks as noted by the Frontline Ventures. The recent findings also noted that challenger lending assets have grown by 30%, and the subsequent performance in some of the regions indicated a rapid industrial growth. A bank like Metro Bank serves over 700000 customers while realizing a growth of 40% per annum. Others like Shawbrook lent £1.6 billion to consumers and 60000 small and medium-sized enterprises in the year 2015. In 2014, Virgin Money had over 2.8 million customers and accrued an accumulative value of £1.25 billion. The remarkable rise of challenger banks has majorly been driven by the new regulations established in Europe. With the current promising state of the entire industry, Frontline venture anticipates the rise of the horizontal banks that focus on specific market segments like the freelancers and immigrants among others.

1.3 Formulating a model case for a challenger bank in Greece

1.3.1 The customers that a challenger bank would go after

The digital aided challenger banks are thought to provide financial services and products meant for customers believed to have been ignored by most of the traditional leaders. The market players have clear reputations and free from public cynicism. The new leaders in the market have the capacity of being innovative as well as work on low-cost models that favour the market that has been side-lined for the longest period of time (Crosman 2018). The challenger banks target customers who can be attracted in three different dimensions. First, the challenger banks aim at attracting the public trust in the banking industry as a result of the financial crisis. Based on the YuoGov survey done in 2013, around 16% of the participants could agree on the fact that banks provided quality products (Walter 2018). 83% believed that most of the bankers were greedy and received too much from the people with considering the economic status. The remaining 1% said that bankers were not doing enough in terms of supporting the economic growth.

In addition, most of the challenger banks attract markets by addressing the financial needs of the marginalized customer. Dominant leaders in the market, thereby putting them in a financial dilemma, normally ignore the financially marginalized population. Lastly, challenger banks aim at attracting populations that have an understanding or the expertise of internet and mobile technologies (Crosman 2018). Looking at all the market features that could drive Challenger banks to operate in Greece, the prominent one is conviction that its aim serves the millennials the most. The latter consist of the population aged between 18 to 33 years. The group is a notorious “mobivore” with estimates highlighting that members are likely to check their phones more than 43 times in a single day. This is a big opportunity for the challenger banks as shown by the Millennials Disruption Index 2015 (Chishti and Barberis 2016). Perhaps, most of them would have extreme financial needs and yet no one is in the market to offer such a service. The millennials are thought to have boosted the number of internet user in Greece, thereby creating an enabling platform for the challenger banks. In the year 2017, digital trends showed that the number of active mobile banking users exceeded 1 million for the very first time. The figure has largely been accredited to an increase in the online users comprised of the young population said to be more profound in terms of the use of internet and mobile technologies (Lee and Shin 2018).

From these trends, it is evident that there is still a market gap, which can be exploited by challenger banks in Greece. With an increase in the digital engagement, key players in the banking industry need to gain as well as retain. For the young people in Greece, digital on boarding, account aggregation, tailor-made use experience, money movement, and loan origination need to be addressed. The millennial market in Greece bears almost the same characteristics to those of other millennial markets in other European countries like United Kingdom. Half of the millennials in United Kingdom and the rest of Europe have consistently been opening banking apps. Over 51% of the millennials think that open banking is a good idea and can lead to better budgets if used conveniently (Lee and Shin 2018). The dynamics of banking penetration indicate that more millennials have confidence in the online services, which gives room for the services provided by challenger banks. In the United States, for example, the market experienced a shift in demographics where the millennial population stands at 92 million compared to the baby boomers that stand at 77 million. This population is a bit lower compared to the figures in United Kingdom (Micu and Micu 2016). The enormous population comprise of the digital natives that are hyperconnected and more concerned with instant financial services. The population is already comfortable with on-demand services such as Uber and Airbnb, which already provide the Google-like experiences. Some of the Eastern Europe countries have already expressed enormous interest in online banking with Malta leading with 72%, Luxembourg coming second with 66%, Estonia having 55% and Czech Republic closing with 50% of the willing users (Micu and Micu, 2016). The rates of use reflect the rates of smartphone penetration. Different economies show extreme penetration of the mobile technologies with Singapore leading with 92%, United Kingdom with 75%, South Korea with 82%, Germany with 65% and the United States with 70% smartphone penetration. Therefore, banking innovation is generally at the peak with more players, especially the incumbent, showing the interest of serving the online market (Chishti, 2016). Across the developed markets, high smartphone penetration, challenger banks are likely to collaborate with the incumbents not only in serving the digital generation, but also in restoring the public trust as far as the banking experience is put into consideration. Therefore, the model adopted in Greece should also bear characteristics that can serve the marginalized market, and the upcoming generation that relies on internet and mobile technologies (Mohan, 2016).

1.3.2 Products to be offered by the challenger banks in Greece

Challenger banks are looking at Fintech developments, which also define the nature of products and services the banks would offer to the market. The definition of Fintech involves financial innovation that can result into new applications and processes, new business models and even new products with material effect meeting the interest and demands of the financial markets. Fintech has gained popularity in the recent years because of innovation, which fits in the existing regulations, and disruption, which demands development of new rules. The Fintech industry largely supports innovative products that are also realized in different sectors (Chishti and Barberis 2016).

Based on the BCBS survey, most of the service providers would offer their products in line with the capital raising, credit services, payments and the clearing and settlement category. The same goes to the need of addressing innovative and technological solutions that would offer the disruptive challenge in the banking industry. Business models should, therefore, focus on digital transformation that should cover online lending, banking, wealth management, payment, virtual currency, and insurance. Greece should, therefore, focus on a “better bank” that is both modernized as well as digitized for the purposes of maintaining core-banking services, customer relationships, leveraging on technologies and modify the current business models (Krishnakumar 2018). Apparently, the products offered in the market should reflect the enabling technologies like Artificial Intelligence, big data, cloud computing and DLT. Businesses are attracted to four major areas upon the entry of challenger banks (Chishti and Barberis 2016). The first area is the framework of new technology manifested in the chatbots, biometry and videos, which can help the model to maintain customer relationships, as well as securing transactions while mitigating fraud and the CFT risks. The innovations foster a convenient system that can secure the identification process of the customers. The second area of focus includes the innovative payment services that support the banking scenario (Mitic 2017). Most of the banks have already worked on the branded mobile payments. Potential customers end up believing that the system can provide secure mobile payments compared to the non-bank alternatives. The provision of the wealth management tools and the add-on services can make the challenger bank to maintain a competitive position in the banking industry. The final area includes digitization of the lending process as consumers as served with instant services in a more convenient way (Osterwalder and Pigneur 2010). Digitization demand that the products offered in the market should carry the efficient interfaces and processing tools. This can allow proper operation of the document management system, and the legacy system. As much as the three areas count as part of the characteristic change in the banking industry, the model to be adopted in Greece should carry more features that are customer centric and quality oriented. Perhaps, the challenger bank is in itself a product presented in the market for the purposes of capturing the attention of the underserved market, and enhance on the saleability of the idea. When the challenger bank is viewed as a disrupter, it should carry more specific characteristics, which also describes the outlook of the new entrant in the market. The bank should carry the simplicity of the customer experience. This slightly adopts the model used by the UK based Atom or the Simple and Moven in the United States (Krishnakumar 2018). According to the two players, challenger banks should carry a clear value proposition that revolves around customer experience. The bank should have the appropriate digital channels and simple technology, which can drive the experience. Besides, challenger banks remain innovative in terms of modifying customer experience with some of the players like Osper and Monzo working on the one-touch integration. Secondly, the model to be adopted in Greece should make sure that the challenger banks address authentication and the scope of the “know your customer” innovation. Most of the digital banks would prefer making use of a vast network if the corner shops or even the field agents (Vysny 2017). In some cases, players like Che Banca! Prefer the use of biometric authentication such as voice and fingerprints, facial and palm. However, the change of technology allows Greece to pick on any identity technologies available in the market, or the one that will restore the public trust. The third facet of the challenger bank as a product in the Greek market should reflect the ability of utilizing new data.

Data on emotions, data from the social media platforms, and biometric data have become more significant in developing banking decisions. Therefore, a significant degree of personalization is needed for the purposes of working on meaningful and relevant offers as well as features. The analysis of the banks such as WeBank, Monese, and MyBank revealed that the unexploited markets were just too expensive for the traditional banks. This means that when a bank fails to develop the appropriate way of addressing new data, it also fails to contain the market forces and dynamics. Lastly, the facet of the challenger bank in Greece should be technology driven. As mentioned before, banks should put their customers first with digital technology served with the priority of meeting the expectations of the customers (Fintechnews Switzerland 2017). Perhaps, the introduction of challenger banks should mark a change in terms of a move form cash machines to apps and from branches to authentication technology. Most of the challenger branks established in the United States and the United Kingdom largely focuses on the unique or exclusive nature of the value proposition. Technology fosters change and it cannot be avoided by any means possible (Chishti and Barberis 2016).

Developing a service model for the challengers in Greece is in itself a critical task. Recently, Praxia Bank was said to have signed the Temenos T24 banking system (Vilar 2018). Notably, the project was quite promising and was seen as a Greenfield implementation as far as the Greek market is put into consideration. The basic goal behind such a service model was to enable and resuscitate the SME lending business while keeping an eye on the digital products as well as the services delivered to customers. The model largely targeted business hubs and retail stores supported by technology partner while fostering the digital-first vision on the basis of a transformation of in-person service to online delivery (Osterwalder and Pigneur 2010). The Temenos model moves in a market where digital experienced has lasted for the past 10 years. With such a service model in place, the competitive space is thought to widen allowing more players to come in the industry. With Temenos model in place, Praxia seemingly saw an opportunity in the legacy technology that would have made the bank to take the leadership in the market. With growing ambitions ad a result of the scalable structure, Praxia sounds as the guiding model that offers the most expected customer experience, while meeting or addressing the needs of the marginalized population (Osterwalder and Pigneur 2010).

Therefore, technology in the banking industry is slowly attracting the open APIs (Application Programming Interface) as well as open platform banking, which are believed to shape financial services to be offered by the old players in the industry, and the incoming challenger bank. With new frameworks beckoning the banking industry, banks need to unlock ne consumer propositions and work on an explosive impact (Neyer 2017). Apart from the banking industry, players such as Alibaba, Google, Facebook and Apple seem to have shown a technology driven service models that tale advantage of the digitization strategy in tapping the new and extensive network of people across the world. The open banking API and the open business models are hitting the financial services in a magnificent way while defining future for the industry. Therefore, it is evident that challenger banks in Greece will depend on the open banking service model, which relies on an ecosystem that connects business customers, third parties and private partners to the banking services (Lu 2017). The model relies on its ability to contain the needs of the customers in an ecosystem where third parties can develop interfaces on top of the bank’s infrastructure. An open banking service model allows the mobile and web developers to access the consumers’ data. With APIs in place, challenger banks can easily create an umbrella for the services designed by the bank itself.

Notably, the challenger banks in Greece will not be working on something new, but it will a matter of convincing the market that the new services is more convenient than what they were receiving before. Facts have it that some of the banks have already provided a platform for the external developers to work on applications as well as functions placed on top of the bank’s infrastructure. For instance, the US based bank – Capital One, is said to have launched open APIs referred to as the DevExchange. The developers consistently worked on the new experiences for the customers such as the reward programs, financial planning tools and money management (Blomstrom 2018). The portal created by developers paved way for the open source projects. On the other hand, Citi is said to have been working on an open architecture. This is accompanied by the fact that they want to produce the best, the smartest and the most applicable Fintech features. A combination of these values is said to offer the best customer experience while leveraging the potential of the partners. It is also evident that Greek challenger banks will crusade the efficiency of the platform business models (Lu 2017). One of the companies that is a platform business is Uber, which connects the entire ecosystem members and gives them room to create as well as exchange value. Riders requesting a service through Uber may find it more convenient, faster and comfortable, which also amount to qualities that can be shared to other members enjoying the platform. The success of the platform business and the accompanying ecosystem are enabled through the positive externalities and the network effects. The platform business, through open banking, will be more attractive and more appealing to the interests and needs of the SMEs and individuals facing emergency needs. Based on the platform business, challenger banks will have a real time access to the current accounts of the SME’s and individuals. The access is said to prompt a service by enabling the challenger to carry out due diligence on the credit risks of the customer. This provides the challenger with the required confidence while making critical lending decisions (Mullineux 2014). Notably, an innovation foundation known as Nesta reported that the market excitement is strongly attracted by the lending capacity. Based on the findings by the innovation foundation, challengers have an opportunity of leveraging on open baking through an enabled easy-to-use online platform believed to integrate and aggregate significant financial services and products. The flexibility of the model can further allow the challenger banks to discard the current provider account. Besides, the most promising niche for the challenger banks includes the non-standard customers including the sub-prime. The category includes customers with limited history, customers who missed payments and the over-indebted customers (Pénet and Mallard 2014). The underwriting process is always complex, prone to inaccuracy and time consuming at the same time. However, the onset of the open banking service model offers the key element of personal interaction, which allows the bank to assess the potential borrower.

1.3.4 Channels to be used by the challenger banks

Most of the digital banking start-ups, known as Fintech start-ups have progressively gained traction in the market for the past few years. This has been due to the retail banking services the start-ups have offered to clients in the market and the challenge they posit to the traditional incumbent business. The landscape for the challenger bank is diverse and the Fintech start-ups have attracted the attention and need of streamlining the operations, product development focus and narrowing down the business. This ensures that challenger banks remain smarter and faster while playing ahead of the incumbent by fostering user experiences and vertical solutions (Mirsch et al. 2016). Such solutions are thought to prioritize the needs of customers in the market. The experience and the gaps in the market attract the challenger banks to adopt the Omni-challenge digital transformation because of the changing channel mix. Almost every consumer in the market wants to have a seamless Omni-channel experience. Most of the bankers would agree that the omni-channel is extremely important and most of the banks, both the traditional incumbents and Fintech start-ups, are still exploring, experimenting, and deploying each phase of the omni-channel strategy (Osterwalder and Pigneur 2010). One would bother ask the constituencies of omni-channel that has attracted the attention of the challenger banks. Omni-channel strategy fosters the cross-channel content strategy used by most organizations in boosting the user experience. The strategy aims at cooperating the communication channels available for the organization. There are many reasons as to why the omni-channel experience is a requisite measure the challenger banks ought to put into consideration. Most of the customers have the expectation of seamless experiences felt in almost every touch point. Most of them would want to move from experiences that are not centred on the customer to the mobile first design meant for retail customers, as well as the desktop first design for the corporate customers (Patel and McCarthy 2000). Customers in the digital era want to move from product silos impose referrals of the customer cases linked from division to division, to an omnichannel that provides the single view of the client or customer. People want a move from disparate digital services that are developed over time to consistent branding noted across the channels and a customer case management realized on any channel (Rogers 2016). They also want a move from the legacy core banking systems with inconsistent experiences to the context aware experience realized through seasonality, geo-location, and the time of day. Customers want customer on boarding believed to eliminate the barriers of entry as switching of banks is made easier. Lastly, customers want to move from handoffs that are not seamless to excellent customer support realized through channels like chats and call centre.

There are many reasons as to why the new players in the industry need to pick on the omnichannel approach. The main one includes the scale of channel coordination as well as integration. The latter confirms a seamless experience, data sharing, the unique brand image, and the overall management. The thought of omnichannel management is seen as the synergetic management of the touch points in a way that provides customer experience in every channel whose performance is optimized (Barisitz 2008). This also implies that the touch points and channels are managed as a single unit. The unity ensures that customers do not only enjoy the touch points but also the brand as a whole (Drechsler et al. 2018). Customers have the freedom to pick on the channel of their preference that can suit different situations in connection to the services provided by the company. For instance, a client can be attracted to a product advertised on the billboard that has a website mentioned on it. The same client may later opt to explore the product through the website but fails to complete the purchase. While at work, the client opts to open the shopping app linked to the company that provides the product (Barisitz 2015). The app allows the consumer to complete the purchase and specifies the point he or she can pick the product. Therefore, omnichannel ensures that a consumer can switch channels without interfering with the transactions and the final purchase. It is also important to note that omnichannel is essentially empowered by data integration (Cortet et al. 2016). This is accompanied by the fact that omnichannel is easily accessed to new opportunities that can avail data through both mobile and social channels.

1.3.5 The response of the incumbent banks

The rapid growth of Fintech is a concern for the incumbent banks who feel that the start-ups will soon start eating into their market share and business as well. Pressure and the loss of the market share are the biggest threats to the incumbents who feel that the Fintech companies will sweep over 20% of their business away. Perhaps, the incumbents are forced to forge “a work together forum”, which is equally an exciting option. A new report released by PwC indicates the effects and the ripples Fintech start-ups cause in the banking industry. The report was obtained based on the opinions from the 544 financial service respondents across 46 countries.

With such trends in the market, the incumbent are more alerted and some seemingly show interest of marketing and selling some of the Fintech products. However, most of them chose to respond to the pressure in different ways. Major changes are noted in the way banks increased expenditure in information technology through heavy investment in digital banking. The same investment goes to accelerators, innovation labs, and even alliances among others. The High street banks, especially in Europe, are working on a start-up program that can incubate most of the Fintech companies while setting aside the requisite venture capital that can fund the same companies. Companies like Barclays went an extra mile in creating a global community meant for the Fintech innovation. However, the technology experts advised the bank on strategic application of the emerging technologies that can affect the bank’s strategy. It is of note most of the incumbents were still addressing the challenges of the financial crisis in 2008-2009. Even before setting up proper structures that could contain the shock in the industry, digital transformation was on its way, a trend that has challenged the competitive moves used by the incumbents. The European Central Bank, for example, pointed out a number of challenges faced by the banks including overcapacity, impact of digitization, low profitability, low interest, cleaning up, fragmentation, Brexit process, and stronger regulations. With such challenges in place, the number of banks fell by 453 with most of them dropping out of the banking industry. However, the introduction of Fintech and digital transformation is both a relief and a challenge at the same time. Most of the incumbents have shown every interest in embracing the digital transformation than fighting it. This has been accompanied by adoption of the new IT architectures as well as technologies such as big data, Artificial intelligence, biometric and cloud among others. The effort is largely directed towards realization of the digital sales, excellent customer experience and development of fresh business models in the industry. Greek incumbent should also follow suit by embracing the Fintech ecosystems under the epitome or paradigm of “open innovation” that largely combines business models, innovation, technology and regulatory compliance.

1.4 SWOT Analysis

The entrance of challenger banks in the Greek market can be analysed along the strengths they can have in establishing their operations, the weaknesses realized, the opportunities that can be explored and the threats they are likely to face. On the basis of strengths, challenger bank can leverage innovation while impacting or changing the financial services and the approach used towards customer services. This strength has already been realized by such firms like Virgin, Tesco and Metro among others in the European Market (Haldane et al. 2010). The availability of banking apps and websites can slightly a new move made by challenger banks while improving on the Temenos model. The second area of strength includes the prevalence of the customer relationships and infrastructure. Most of the challenger banks are not coming in the market to offer a new product or service, but they will work on a new customer experience built on the prevailing infrastructure (Beattie et al. 2003). The challengers will simply be widening in the customer interactions, the same way Tesco Bank did it. Apart from the challengers enjoying the strengths, they can still face different areas of weakness. First, challenger banks are characteristically small in size, which can work negatively in their presence in terms of the financial services (Worthington and Welch 2011). In addition, the small sized challengers may not be in a position to handle massive transactions thereby losing the market back to the incumbents. Secondly, the challenger banks in Greece can still suffer from low awareness levels among customers. This means that online presence alone cannot influence the perception of people and lacks the impetus of surpassing the establishments in the market. On the other hand, challengers may still need the core skills in the banking industry. Some of the areas that call for the core skills include regulatory compliance, liquidity management and risk management among others (Consultancy.UK, 2016). With such a gap in challenger banking, it is of note that most of the challengers would be forced to partner with the incumbents for the purposes of learning how to operate a bank. Apart from the weaknesses, challenger banks in Greece can also exploit on a number of opportunities. First, the market size for personal banking is still big and new entrants still have enough space in the banking industry. Secondly, the financial crisis dimmed the public trust with most of customers looking for alternatives in the market. The third opportunity includes divestments, which includes the possibility of creating a branch network or even acquiring an existing bank (Worthington 2014). With favourable regulations in the market, challenger banks in Greece have an opportunity of extending their networks in gap areas left by traditional players who are forced to make their disposals. As much as the opportunities look attainable, there are various challenges the challengers are likely to face in the market. Stronger capital and accounting requirements may strain the capital investments by challenger banks. Consumer behaviours as well as pricing structures can be challenging for the new entrants.

1.5 Presentation of the case for a challenger bank offering credit/debit cards

The rise of challenger banks is an awakening call to the key players in the banking industry, which is being disrupted by the inevitable digital transformation. However, this section presents a unique case of a challenger bank that offers debit cards to its customers. As much as the case may not have occurred in Greece, the trend or the outcome can still be applied to challenger banks that can be introduced in Greece. Notably, Starling Bank claimed vertical debit cards, as well the way consumers made use of them. Perhaps, Starling Bank presents a unique case of challenger banks that are making use of debit cards (Mavadiya 2018). The vertical design adopted by Starling Bank slots the debit cards into cash readers and cash points. The debit card bears unique features that incorporate the customer details including the card number, the expiry data and the name as well (Baratta 2016). The new card for the challenger bank reflects the way customers use such cards in the contemporary settings while slotting them into card machines and ATMs. The art director Mark Day argued that the debit card was essentially redesigned to align it to the Starling’s banking app while streamlining significant information on the back of the debit card. The new card has attracted the attention of many customers across Europe and the United Kingdom in specific (Bunea et al. 2016). The unique experience with the new card includes the contactless payment and the signature strip. At the same time, the new card does not have the sort code or the account number, which used to appear on the debit card before. Checking the details of the card demands the customer to go back to the smartphone app. The challenger bank stood out as a disruptor as Starling introduced accounts, which could be set up in minutes. The account avails real-time notifications and spending insights (Mavadiya 2018). The account bears multiple payment methods realized through the Android Pay, Fitbit Pay and Apple Pay among others. The card provides a new experience to all who use it. First, the card exhibits no unauthorized overdraft fees and the interest is earned in the customer’s current account. The app enables access to different financial products, insurance and pensions. Starling is the burgeoning group of the challenger banks that aim at simplifying management of personal finances as well as technology. However, the case of Starling challenger bank does not absolutely reflect the features of the Fintech Stat-ups. This is because Fintech start-ups prefer internet services, which is vested in the app technologies, rather than making use of the cards themselves. However, the idea of using new cards by Starling does not exclude it as a challenger bank. This is because it bears key features of the challengers (Scardovi 2017). The thought of debit cards as being utilized by some of the challenger banks has raised the question of the card transactions and the impact such transactions have on the financial plan. Starling Bank simply gave the picture that debit cards can still be used in the light of Fintech as shown through the capital controls. Capital controls are simply restrictions asserted for cross-border trade (Górka 2016). Most of the capital controls are known for domestic as well as financial cycles in the country. The study of card transactions in Greece shows a whopping 80%, which appeared evident during holidays such as Christmas (Tzortzi 2016). Perhaps, the use of debit, as in the case of debit cards, hit record levels, which are a positive indicator of improved online transactions in daily life. In the year 2016, the bank data showed that from 18th to 24th December, card transactions indicated a tremendous increase. This trend is in line with the performance of Starling Bank, which showed a significant growth over the years since the onset of financial technology. The change is largely attributed to the significant increase in the plastic money payments over the holidays (Tzortzi 2016). The same change is attributed to the forced adjustments across Greek consumers to significant conditions created behind capital controls believed to have imposed by the government two and half years ago. However, records shows that still most of the technical failures and spikes led to serious malfunctions that emanated from the cards that were initially issued by National Bank of Greece. In most cases, delays, rejections, and incomplete transactions were recorded at the time, a trend that slightly affected the performance of Piraeus Bank. Most of the creditor sector sources indicated that no universal problems barred the payment pro cesses (Tzortzi 2016). However, what came out evident is the fact that data point to most of the consumers enabled them to make small purchases, which is a practice that strengthened the landscape for financial technology. Banks in Greece are now going the Starling way and promoting contactless card payments for significant transactions that would amount to 25 euros as well as payment through smartphones (Pimentel and de Sousa 2017). Data analysed towards the end of 2017 indicated that debit cards came close to 12.5 million from an approximate of 11.5 million in the previous year. Besides, card terminals are said to have doubled in the same year showing the most promising performance form the year 2015 to 2017. The trend since the capital controls in 2015 has seen Greece being realigned to other market characteristics that have favoured the performance of banks in the country. The onset of Xapo Bitcoin Storage Company has led to new hopes in the banking industry after it announced tying MasterCard to digital currency wallets. Despite the partnership being disavowed, Xapo went for the Bitcoin backed debit card, which was integrated in the Bitcoin wallet system. Same to Starling Bank and Praxia, both the Xapo Wallet and Debit Card are perfectly aligned. The question of why Greece does have never put up a competitive performance lies with the analysis of the country’s position in the global marketing (Pimentel and de Sousa 2017). The entry of debit cards in the Greek Banking Industry has not brought the country close to the performance of Fintech companies in United Kingdom (Chant 2015). This argument can be supported by the analysis of Greece Market Potential Index, which has been one of the most profound tools for internationalization.

The performance of the Greek market has been fronted as the key factor in determining the penetration of card transactions. From the two tables on the Market Potential Index, it can be determined that the average performance stands at 79, which is relatively below the European Union – 28 Average (- 12). The Market Potential Index score further stands at 80.8 for goods and 77.9 for services markets. With such a performance in place, Greece is ranked as one of the bottom three European Union – 28 countries for different goods in the market (Consumer Market Scorecard 2018). The analysis of service markets, which are linked to card transactions and financial markets, shows that the MPI score on Airline services and personal care services is quite high. However, banking services served along the loans, credit card and card transactions showed the worst performance in the market. However, the survey done on 23 services markets in 2015 and 2017 indicated a significant increase in MPI in terms of mortgages, a service that has continuously been integrated in Fintech companies (Consumer Market Scorecard 2018). This works in line with the overall scores in the Greek service markets which have improved since 2015 in terms of choice and trust among other component. The convincing performance of the Greek market is an indication of an improved business environment that can support card transactions and other services provided through financial technology. While Greece showed no improvement in the first place as a result of the dominance of incumbent banks, the current attention given to mobile predators in the market looks promising at the time when Praxia just made its entry in the Fintech market (Chant 2015). However, mobile predators are changing market trends with virtual currencies shaping payment microcosm. The success of Bitcoin and the emergency of cryptocurrencies show that electronic payment will soon get the better side of the Greek banking industry. Perhaps, card transactions in most of the challenger banks are more secure and trusted than just online transactions that are more susceptible to cybercriminals (D'Alvia 2017). Increased cases of digital identity theft make fraud to be a possible mission in the face of embracing financial technology in the financial market. Perhaps, this are part of the many challenges that can either discourage or encourage the Greek market to embrace the new technology in the market, or reject it based on security concerns. While Starling looks more comfortable running a Fintech, chances are that the disruptive nature of technologies can hamper the growth (Consumer Market Scorecard 2018). This means that sound innovation should be invested in card transactions for the purposes of ascertaining security measures and precautionary details.

2. Comparison: Greece vs. other countries

Greece is emerging as one of the hubs for the innovative start-ups. The country has helped in fuelling transformation through the EquiFund, which is also a platform that was once established by European Investment Fund (Nicoletti 2017). The country believes that an investment of €1 billion for early-stage development is sufficient to propel the Fintech start-ups to another stage of growth. Greece is one of the favourable locations for most of the start-ups in terms of the activities as well as investment. Greece has a highly educated pool of talents with almost 25% of the people aged between 25-64 years having a bachelor’s degree (Antoniades et al. 2018). Greece is located at the crossroads of Africa, Europe, and Asia, and the fact that is a member of the European Union (EU). These make it a strategic country for the Fintech investments that can serve the major markets within and around it. However, when one compares Greece with other countries as United Kingdom, the United States, and China, notable differences, and similarities can be realized (Chishti and Barberis 2016). First, Greece is still encountering a limited access to the convenient talent despite an enormous number of graduates in such fields like engineering, science, technology, and mathematics. The labour market demand is tight and a shortage of workers training in some of the high-demand fields is evident. Perhaps, specialized training courses must have been a missed opportunity. This is different from such countries like United Kingdom, the United States, and China among others (Antoniades et al. 2018). The UK, for instance, housed the first challenger banks and boasted to have had a large pool of talents. The financial as well as the insurance sector remains the high-specialized sector as far as labour is put into consideration. However, economic shocks, at some time, interfered with the first challenger banks. The global crisis saw an enormous exodus of talents from the banking industry, leaving it with less people who had the right knowledge regarding the sector. Despite the exodus, London still boasts a large as well as strong talent base that is stronger than the rival European cities like Paris and Berlin.

Secondly, Greece has almost an unfriendly market structure and business environment with restrictive market regulations impeding the economic progress and technological innovation. Greece takes the 67th position in terms of the easiness of doing business based on the World Bank’s rankings. The position is one of the lowest to have ever been held by the OECD members. For a commercial dispute to be resolved in Greece, one would take around 53 months compared to 19 months considered by other OECD countries (Antoniades et al. 2018). The pricing restrictions as well as state monopolies generally lead to heavy competition distortions witnessed in the local market. The result of such distortions is a small economic structure, which highly discourages the possible creation of competitive corporations and small businesses that have the capacity to both export and innovate at the same time. Based on the European Commission report, Greece exports 33% less because of the profound institutional barriers (Chishti and Barberis 2016). This is different from such a country like United Kingdom and the US where the government support as well as regulation accommodates innovation realized in the financial services sector. In 2016, for instance, the Financial Conduct Authority regulatory sandbox allowed the test innovative products that propelled the business models to the next level. The same environment extends to other global markets like China and the United States, which believes in the challenger banks as the next big solution to the global crisis that lessened public trust in the high street banks (Haddad and Hornuf 2016). The digital transformation in the banking sector displays the fact that markets across the world are ready for change (Davies 2013). Despite the intolerable ecosystem in Greece, the country still has an opportunity to embrace the market dynamics especially in the financial sector. Greece can still embrace the incentive packages, which can attract as well as retain talent. This will attract people towards Fintech investments, which can fuel the growth of the challenger banks in the market (Antoniades et al. 2018). Some of the adjustments to be considered in the incentive package include providing the expatriates with the tax incentives, which encourages them to invest their expertise in the economy. Secondly, Greece can also reform the tax policy more on the employee stock options thereby creating a special and separate category for the employees and the young investors in the economy (Chishti and Barberis 2016). With significant changes in the market, Greece will slowly attract investments in the banking sector and will soon move closer to other OECD member countries in terms of the economic performance because of a well-supported banking industry.

Conclusion

The research invested in the analysis of the challenger banks and worked on a model that can be adopted by Greece. The emergence of challenger banks is aligned to the growth of the banking sector in Europe. The growth of the start-ups came after the global financial crisis, which saw the public showing no trust in most of the incumbent banks. The research also worked on a model case that can be adopted by the challenger banks in Greece. The model case included addressing such areas like what the customers would go for in a challenger bank, the Fintech products that can be offered by the challenger banks, the service model that can be adopted and the effective and convenient channel that can be used by the banks in embracing the digital transformation. The SWOT analysis showcased the market demand, which is enormous, and the need for divestments, which can be encouraged through challenger bank investment in the Greek market. The research went ahead to present a case of Starling bank, which is a challenger bank that is using the debit cards in an error where online apps dominate the Fintech products. Comparison of Greece with other countries indicates the impeding factors in the Greek market that makes the country lag behind other OECD countries in terms of the growth in the banking sector. The research also suggests few changes that need to be done for the country to move in a better position in terms of the easiness to do business.

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