A few weeks ago, Chime, one of the nation's largest challenger banks with more than 5 million customers, experienced an outage that left consumers unable to make withdrawals or deposits and without access to Chime's website and mobile app for over 24 hours. During this outage, customers were stuck at restaurants and in parking garages, incapable of retrieving their funds or paying their bills.
The chaos surrounding this disruption demonstrated that cash is no longer king. While it used to be comon for consumers to carry at least $20 in their pockets at all times, this is no longer the case, especially for younger generations. Millennials and Gen Z are becoming fully reliant on plastic and digital payment methods, and when these options fail, they often have no backup plan.
This isn't Chime's first outage; in fact, it is the neobank's third since July. As companies have learned, todays' customers are largely unforgiving of poor or failed user experiences (especially when it comes to their finances) and are quick to share their frustrations via social media. As soon as the outage occurred, customers lashed out on Twitter, threatening to leave the bank and even sue. while some of the threats went a little far, the consensus was clear: Chime's customers were not happy. Millennials and Gen Z typically lack the brand loyalty that have characterized previous generations; such friction and disruption can cause these customers to quickly turn their backs on a brand and search for an alternative provider.
While some issues ultimately can't be prevented, it is critical that financial services organizations are doing everything they can to facilitate optimal digital experiences. Consumers expect their financial institutions to provide an experience that is as seamless as the interactions they have with major retailers and tech companies. Perhaps most notably, apple is setting a new standard for the account opening experience with its Apple Card. The application is quick, easy and requires very little data entry. These types of experiences that are being set outside the financial services industry, but are now creeping inside, are setting the gold standard for experiences and if bans and credit unions can't meet these expectations, they risk becoming irrelevant. And, the experience must be consistently good - Chime could provide the most intuitive experience in the world, but customers still won't hesitate to leave if disruptions persist.
Chime's outage has left many wondering if digital banks are ready for prime time. In today's "digital everything" landscape, digital only banks certainly make sense; they allow institutions to cost effectively expand their geographic reaches to gain deposits. And since digital is preferred channel of consumers, this tactic will most likely continue to gain traction. But for challenger banks to be truly successful, they must leverage data to understand what consumers want and consistently deliver it. There must be a true, tangible differentiator, something that makes the digital only experience better than simply using a banks' app.
Traditional banks and credit unions have the opportunity to launch digital only brands to attract new customes and members and serve existing ones in fresh ways. However, they must ensure that first and foremost, their service is dependable and consistent - outages such as Chime experienced can be detrimental to bank's reputation and its bottom line. However, if done correctly, digital only banks can be a strategic way to boost the customer or member experience and win deposits in an increasingly competitive landscape.