Why being a challenger bank takes more than just a re-spray

David Parry
Richard Branson Photocall
Source: Getty

Virgin Money last month reported record half-year results, increasing profits 15 per cent year-on-year.

The designated challenger brand is clearly doing well. Yet, it takes much more than a profit rise and a Virgin re-spray to be a true challenger.

Recent years have ushered in a new wave of banking challenger brands seeking to chip away at the market share of legacy brands mired in the fallout of the 2008 financial crisis. No doubt Virgin Money is seeking to capitalise on this.

Yet, it possesses little that actually differentiates it from more established competitors; the same services, with a Virgin re-spray. However artfully Richard Branson promotes the overall Virgin brand, this won’t do.

If it wants to crack the challenger status, Virgin Money needs to build a strong, independent brand with offerings that are disruptive, useful and innovative. Until then, it's just borrowing the Virgin glamour.

With customer satisfaction levels in banking ranging from miserly (42 per cent) to less miserly (82 per cent), according to a recent Which? survey. The conditions are ripe for a challenger to step into the fray and hit the 90%-plus mark, where banking should really be.

So what can aspiring challenger brands do? There are five key tenets to branding for challenger status, from the superficial to the defining.

First, messaging. These brands challenge the sector’s conventions and norms through their comms; think PaddyPower and Avis.

Second is value and how industry norms and expectations are challenged on price and value perceptions, with the likes of Ryaniar and Lidl among those leading the way.

Third, if specialisation is your thing like for Innocent or Ella’s Kitchen, your brand will be challenging expectations on quality or performance by focussing on product, audience or market.

The fourth, experience, should see your brand challenging what’s being offered by redefining how you access a product or service – market leaders here include Vueling and Ocado.

And finally, that term du jour, disruption. Some brands like Uber and Brewdog now challenge by transcending their sector to create new business areas.

Some brands are already tapping into this. Try Monzo, replacing traditional banking models to lure a growing chunk of the under 30s. Or Sweden's Handelsbanken, quietly generating record growth in the UK with decentralised management, no bonuses, no sales targets and impeccable customer service.

These ‘experience challengers’ are using brand as a vehicle to explore that feeling of interaction and to become a frictionless extension of their consumers’ lives. They’re challenging conventional wisdom in experience to push boundaries in the sector.

Other areas are however underexploited. There’s space for a ‘messaging challenger’ akin to PaddyPower, breaking with the norm by delving into the controversial. Or perhaps there’s a Vueling-esque ‘value challenger’ brand around the corner, making cheap acceptable through quality.

These are exciting times for the banking sector as it goes through a much needed branding shakeup from which it’ll emerge a far healthier and nimbler industry. Disruption, utility and innovation are key here. Virgin Money therefore needs more than a respray to be a legitimate challenger brand, with challenger momentum. Where Virgin Money may be able to be a true challenger brand is in how it executes its partnership with 10x Future Technologies. But successful execution won’t ex post facto make it a challenger brand today.

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