The Challenges Challenger Banks Must Overcome To Compete

November 13, 2019

Challenger banks — financial firms offering something much like banking services, and looking to compete with old-school banks — are a new idea. The basic structure that underlies them is not.

As Ingo Money CEO Drew Edwards noted in a recent conversation with Karen Webster, the model that most so-called challenger banks offer is basically a variation on an old theme. The customer gets a reloadable prepaid card that functionally behaves much like a debit card attached to a real checking account, and the card is also paired up with a slick digital app. Firms with that business model have been around for over two decades.

“Green Dot has been doing this for years. So has NetSpend and a whole host of other players. This is not a new story,” Edwards said.

The product, he noted, hasn’t changed much between the prepaid card firms that run the first version of this model and the Silicon Valley venture funding-backed challenger banks that are proliferating today. What has changed is the target audience.

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