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Specialist VS generalist: the challenger bank advantage

Specialist VS generalist: the challenger bank advantage


5 years ago

5 years ago


Find an under-served market and fill the gap: that’s the strategy challenger banks and fintechs are adopting all over the world, supported by advances in technology. We look at the challengers in Australia, the US and the UK successfully carving out their niche. 

In Australia, Judo bank is addressing the unmet needs of small to mid-sized businesses – and they’re serious about becoming the most trusted SME business bank in Australia. Joseph Healy is one of the co-founders of Judo Bank. In a past life, he held senior positions at both NAB and ANZ. He has a favourite analogy he uses when describing a specialist bank versus a generalist bank.

“Take a decathlon gold medallist at the Olympic Games,” he says. “Compare the time they achieve in each of their events and compare it to a specialist – say a 100m runner. The specialist always outperforms the generalist in their event by 25 to 35%.”

In the context of banking, Healy believes a specialist bank’s superior performance comes down to their deep understanding of customers and opportunities. Judo Bank’s positioning as a specialist lender that “only does SME banking” is something they see as a key differentiator; that, and their commitment to giving customers a decision within five days.

In the context of banking, Healy believes a specialist bank’s superior performance comes down to their deep understanding of customers and opportunities.

A challenger bank intent on filling the gap

Before Judo was founded in 2015, “SMEs struggled to get finance from banks,” says Healy. Incumbents were fixated on property lending because of its higher return on equity; at the same time they were industrialising their operations to further separate consumers from bank staff. “That was another factor behind what I would describe as the demise of SME banking,” Healy says.

While most organisations are digitalising their service proposition to customers, Judo Bank describe their approach as ‘high tech, high touch’. As Healy says, “our highly efficient operating systems and technology make us easy to do business with, but there’s always a human here you can speak to.”

After spending the last nine months creating general awareness for the brand through social media, print and outdoor, Judo Bank are getting ready to target SMEs specifically, highlighting the points of differentiation between Judo Bank and the major banks. The marketing mix will include video and blog content based around customer testimonials, pushed out through social media.

Judo Bank want to be seen as passionate and deeply experienced in the craft of SME banking. They’re also going to emphasise the purpose behind Judo: to be the most trusted SME business bank in Aust.

Global challengers

The banking system in the UK has also tended to under-serve the needs of the SME economy, resulting in numerous institutions springing up with philosophies and strategies akin to Judo Bank.

Oaknorth Bank provides business and property loans in the UK, targeting small and medium-sized businesses and entrepreneurs with niche marketing campaigns revolving around specific PR, events and word of mouth. Aldermore Bank offers specialist business banking services and finance solutions to SME businesses. Their first ad campaign was targeted at “go-getters” – business customers who are driven to seize opportunities.

Other niche markets are getting a look-in too. Mobile-based Countingup has a bank account aimed at sole traders, freelancers and contractors. “The UK is a good example of how these disrupted models can be established and grow,” Healy says.

In the US, where the market is far more fragmented, new banking entrants are more likely to be fintechs. These startups have entered the market using technology to target various segments. For example, small businesses can now access products for payments, insurance, accounting, lending and more, from a range of different fintechs.

Bento for Business, a Chicago/San Francisco company helps small businesses manage corporate expenses. Mercury targets tech startups specifically, providing bank accounts with features that keep track of cash flow and tools to maximise operational efficiency. With a tagline of “Where small businesses get funded,” Atlanta-based Kabbage is an online business lender that’s helped hundreds of thousands of small businesses access working capital. BlueVine, previously a small business lender, is now moving into the banking sphere with lines of credit, term loans and cheque accounts.

The message for big banks

For a “generalist” bank to keep up with the disruptors, market segmentation is the next best thing. Divide your target audience into sub-groups based on criteria including product usage, stage of buyer journey, propensity to buy, demographics, geographic area, psychographics, communication behaviours, how they use media etc.

For a “generalist” bank to keep up with the disruptors, market segmentation is the next best thing.

Channels like LinkedIn can help a large institution reach segments using targeting criteria based on member-entered data and user behaviour. Custom segments help marketers reach specific target audiences, for example, job searchers, CEOS, opinion leaders, etc. Your company’s LinkedIn Showcase pages can each focus on a specific audience too.

LinkedIn’s Audience Engagement Map enables marketers in banks and other financial institutions to discover new audiences, understand the types of content those audiences engage with and see how your content performs against industry benchmarks.

When you’re targeting your segments, you don’t have to be all things to all people; you can personalise. You can tailor your messaging to be relevant to the needs of a specific audience, and to strike the right tone. And be strategic about the channels you use. In the end, it’s more cost-effective and gives you stronger connections, which is the name of the game.

At The Dubs, our niche is financial services content marketing. Practising what we preach, we can help you capture the attention of a targeted niche audience. Get in touch.

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