VCs Love Challenger Banks

Challenger banks are all the rage these days. Countless news stories speak of how they are disrupting traditional banking. And they are raking in the dough from venture capitalists; VCs invested $1.5 billion in digital neo-banks in the first half of 2019, a 15% increase from the same period in 2018, as per American Banker. 

Challenger banks are seemingly riding the tailwinds ever higher to new heights. But how close are they to truly “disrupting” the traditional banking industry? In a widely read piece earlier this year on Forbes, it was noted that only 3% of millennials have their primary checking account at a digital bank, but almost half do so at one of the megabanks. Meanwhile, big banks are investing billions in digital as they continue to ramp up their tech bona fides. 

Challenger banks have indeed made an impact on the banking industry, much of that impact being to spur lethargic legacy institutions to invest more in digital. But whether they can soon turn all these VC dollars into more customers remains to be seen.