Placing marketing over product, dismissing potential partnerships and overstaying in a single market are key mistakes entrepreneurs should be on the lookout for when building a challenger bank.
Building a neobank comes with a set of challenges, however, avoiding the main pitfalls, such as over-focusing on marketing while neglecting product development, dismissing possible partnerships without considering the potential benefits, and overstaying in the local market, increases the probability of launching a profitable company, capable of establishing a strong market presence.
Anton Zujev, Head of Business Development at Fininbox, shared his views on the mistakes in question, along with comments about the main challenges such companies face ahead.
Placing marketing over product development
To remain competitive in the ever-changing market, businesses are under intense pressure to develop and launch products or services at an even greater pace than before. One of the ways to persuade potential clients and build a strong brand image is to leverage different marketing strategies. However, product promotion should not overshadow product development.
A survey by 280group has found that one in five products fail to meet customer expectations. According to Mr. Zujev, entrepreneurs, aiming to build a successful challenger bank, should focus more on the product roadmap, and less on promotional tactics, as it would ensure that the presented solution is actually market-ready.
“It’s easy to lose track of what’s important, as the first stages of launching any product or service can be quite hectic. That said, keeping a laser-focus on innovation rather than promotion is one way to increase your chance of success,” says Mr. Zujev. “Developing an MVP should be the number one priority, as it will lay the groundwork for all future innovation.”
The attention span of the modern consumer is incredibly limited; therefore attracting the right audience becomes a thoroughly calculated task, which has to be executed with immense precision to avoid burning a hole in the company’s pocket. Moreover, high customer acquisition costs set a limit on the number of times a company’s offerings can be presented to the public before it loses interest. Placing focus on development enables to introduce a product that brings clear value to the client and is ready to be marketed.
“All messages broadcasted to the public have to be carefully thought through, as there is little room for second chances,” says Mr. Zujev. “So in order to enter the market with confidence, make sure to have a well-developed product.”
Marketing is one the major cornerstones of a robust business strategy. However, long-term success relies on being able to continuously provide value to the consumer, as opposed to making a successful promotional campaign without the evidence to back up the product’s value.
Dismissing potential partnerships
Increasing digitalization across all industries has influenced a growing demand for more fast, flexible and personalized services. Utilizing strategic partnerships can be a great way not only to adapt, but to reshape the current status quo and strengthen the company’s position in the market. This is especially relevant to challenger banks, as, based on the rate at which digital transformation is shaping the industry, having a reliable technology partner has become essential.
Fearing dishonesty or unequal commitment to responsibilities, many are quick to dismiss potential partnerships, but, as stated by Mr. Zujev, this may cause to miss out on valuable expertise a trusted partner would bring to the table.
“You can’t be an expert in everything, however, you can build a team of experts. Understand your strengths and weaknesses and collaborate with a trusted partner to fill in the gaps,” comments Mr. Zujev. “With that said, it’s vital to make sure that you’re heading the same business direction beforehand.”
Partnerships are particularly valuable to the FinTech sector, as it accelerates customer-centric growth. Consumers expect better and cost-efficient options to manage their finances – collaboration enables to provide such solutions at greater speeds and acts as a catalyst for identifying new opportunities. For challenger banks that do not want to spend time reinventing the wheel, Fininbox has developed a white-label solution, which enables to compose their digital banking infrastructure to the individual needs of the company.
Overstaying in the local market
Even though business expansion requires a considerable amount of additional resources, startups do not have the luxury to become stagnant. While it is important to establish a strong presence in the local market, casting a wider geographical net should be one of the prioritized goals.
“Stagnation should be one of the greatest fears for challenger banks,” says Mr. Zujev. “Lingering in one place for too long will prevent unlocking additional revenue streams and result in a serious financial decline, and it’s not like they have money to burn. Aggressive market penetration is crucial in order to sustain the business.”
Expansion to international markets presents great challenges, as along with the unfamiliar territory comes new competitors, cultural barriers and different economic politics. However, the benefits outweigh the drawbacks, as it introduces the business to a vast pool of potential clients, attracts more foreign investment opportunities and paves the way to global recognition.