Best-selling author Malcolm Gladwell pretty much nailed it when he wrote in The Tipping Point to explain how an idea, product, message or behaviour develops into a relentless trend. He defined it as: “That magic moment when an idea, trend, or social behaviour crosses a threshold, tips and spreads like wildfire.”
Right now retail banking has reached its own tipping point as more money than ever before is being invested into fintech ventures, like challenger banks. Industry analysis shows that challenger banks are currently seeing some strong areas of growth.
But is this growth a sign of a true tipping point to come in the banking industry, or is it just a novelty in a well-established sector that will soon fade away?
Why some customers may be making a change:
• A fresh start, a clean slate.
• Attracting niche markets by not trying to be everything to everyone – concentrating their efforts.
• Simplifying their product range – less choice to be confused about.
• A cultural foundation that is different from the existing banks.
• Faster, more agile IT systems, starting with digital at the forefront, not trying to work it into legacy systems.
In Gladwell’s book, the benefit of ‘Band-Aid solutions’ are discussed. He says: “A critic looking at these tightly focused, targeted interventions might dismiss them as Band-Aid solutions. But that phrase should not be considered a term of disparagement. The Band-Aid is an inexpensive, convenient, and remarkably versatile solution to an astonishing array of problems. In their history, Band-Aids have probably allowed millions of people to keep working or playing tennis or cooking or walking when they would otherwise have had to stop. The Band-Aid solution is actually the best kind of solution because it involves solving a problem with the minimum amount of effort and time and cost.”
Challenger banks might seem to offer a Band-Aid solution to the current banking situation. They appear to solve some of the problems that currently exist today, and while a lot of effort, time and cost, needs to go into getting them off the ground, they certainly can be agile and lack legacy problems.
But the question remains, are challenger banks just Band-Aids? Will they be a fad or is there a strong enough push coming that will enable them to be the tipping point to change our banking culture for good?
“In the end, Tipping Points are a reaffirmation of the potential for change and the power of intelligent action. Look at the world around you. It may seem like an immovable, implacable place. It is not. With the slightest push—in just the right place—it can be tipped.”