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Challenging the Challenger Banks: New NA Challengers That Survived the Pandemic

Over the past year, the term digitisation has been used an unprecedented number of times as companies across all industries, including the fintech industry, have had to adjust their business models to account for the pandemic. One subcategory of the fintech world that has seen its fair share of digital development over the past year is challenger banks, as many saw this as an opportunity to capitalise on the need for digital payments.

Challenger banks have been evolving since the early 2010s, as they abandoned the need for a physical, walk-in banking experience and allowed customers to do all their banking needs online. From greater transparency and ease of use, to handy budgeting tools and ‘polymorphic’ debit cards, challenger banks have been transforming modern-day banking. However, they did not take off immediately in the US as they did in the UK. Initially, customers only responded well to startups that gave them convenience by connecting to their existing bank accounts, like Venmo for easy peer-to-peer payments or Moven for personal finance management. However, as they have been gradually adopted, some challengers have managed to find their fortune like Chime and Varo.

In an era of increased digitisation, it is easy to think that most challenger banks would be able to find success, as high street banks were not a viable option with people being confined to their homes in lockdown. This has not been the case.  Various start-up challengers who were hoping to capitalise on the digital boom quickly found out that it was not so simple to start up a successful bank or banking platform. Azlo and Simple are two examples of banks that tried to capitalise on the pandemic’s digitisation but were unable to sustain themselves as many challenger banks have found it difficult to make a good profit. Even global successes like Monzo struggled as they had to freeze many users’ accounts – on Trustpilot, 12% of reviews are now “Bad”, with the bulk of the complaints about accounts being shut down or frozen, leaving customers unable to access funds.

Generally, there were three attributes that new challengers on the market introduced. The ability to access a paycheck early, build a credit score, and be given an interest-free overdraft. These features have become used by all new “challengers” meaning the unique value they once had, no longer exists as it has become the norm. The best banks and financial services providers meet three standards, Hans Morris, managing partner of Nyca Partners, told American Banker: “Is it relevant to you? Is it fair and transparent? And is it seamless?” These are questions many of the new challenger banks have been asking themselves as they appeal to a specific group

These case studies take an in-depth look at some challenger bank’s “challengers” and what they are doing to differentiate themselves from the rest and how they intend to grow and become the next global success story. What is clear, is each is aiming to deal with a different group be it students, freelancers or financially unwell citizens to first establish itself and create a user base.

Case Studies:


Lili is a digital banking company found in 2018, by Lilac Bar David. Designed to help freelancers, it is not only meant to be a banking experience but an all in one experience that aims to solve different pain points that many freelancers managing their own business come up against, whilst also providing a banking option. Lili pride themselves on their no hidden fees policy: there are no start-up fees when an account is opened, no monthly maintenance fees, and no minimum balance is required to maintain an account. They aim to be the all in inclusive solution for freelancers removing the need for multiple solutions to be used at once.

When looking at Lili’s unique features, ease of access for consumers is was clearly a priority. When swiping a Lili card, the transaction is automatically categorised to the deduction of IRS, with consumers only swiping right or left to categorise the transaction as work or personal life-related. This means consumers never miss a deduction as receipts don’t need to be saved, which in turn leads to a maximised tax deduction, and minimised tax payments. An additional unique selling point Lili have is the concept of a personalised tax bucket. In order to prevent income from being spent without consideration of end of year taxes, a percentage of earnings is recorded and shown to consumers so they know how much they need to save. That percentage is then automatically deducted from the paycheck and moved to the tax bucket, leaving the customer’s true balance behind.

“Reviews have come back saying it’s like there’s a real accountant is in their hands,” said founder and CEO, Lilac Bar David. When looking to the future she said, “We want to try and solve as many pain points of managing your business. We started solving the tax pain points and saving for emergencies, but we want to further focus on things like invoicing payments and offering different credit products and improving customer’s credit score.” Freelance income is so unstable that maintaining a good credit score is tough – Lili aims to help with this.

BM Technologies

Formally known as BankMobile, BM Technologies is a banking platform currently with over 2 million account holders. In January 2021, BM Technologies went through a merger with Megalith Financial Acquisition Corp and became a publicly traded neobanking fintech, with Luvleen Sidhu, being the youngest female CEO and founder to take a company public.

BM Technologies (BMTX) employs a Banking-as-a-Service (BaaS) strategy and through this model, is able to acquire customers at a lower cost than traditional banks and banking platforms.BankMobile Disbursements provides the BM Technologies BaaS platform to roughly 725 colleges and universities, serving one in every three college students in the US. Some of BM Technologies’ unique features include robust mobile apps; credit such as personal loans, credit cards and student refinance; online bill pay; card on/off switch; financial wellness; and a scholarship and sweepstakes program for students using our BankMobile Vibe student account.

When asked about customer response to unique features and the effect the pandemic had, Sidhu said, “The pandemic increased the need and want for digital banking solutions, making our mobile-first service even more appealing. The design and seamlessness of our platform is also attractive as are our higher-than-average interest rates. Students also like to participate in our scholarship and sweepstakes programs.”

When discussing the effect of the pandemic on the company itself Sidhu said, “We had to quickly adjust to working fully remotely. Because of our digital model, we were able to handle this transition well and operate effectively. We placed more of an emphasis on having touchpoints with employees and also offered them more flexible work schedules.

“We have even been able to grow our business, for example collaborating with Google, and launching new service offerings, such as Workplace Banking.”

BM Technologies has disbursed $377 million in government funds, including stimulus payments and tax refunds, to its customers. Sidhu believed, “this indicates that customers were viewing their BM Technologies account as their primary banking relationship.”


Empower is mobile banking that offers Americans living paycheck-to-paycheck solutions to weather short-term financial hardship and achieve long-term financial wellbeing. Empower’s features aim to help people save and spend more wisely without its customers having to become money experts.

75% of Americans live paycheck-to-paycheck while 40% wouldn’t be able to cover a surprise $400 expense with cash, savings, or a credit card charge they could pay off comfortably. Those stats are pre-coronavirus, and the pandemic has only heightened the financial toll and anxiety for tens of millions of people in the US. A recent NPR and Harvard survey said nearly 50% of US households report facing serious financial pain given the economic fallout from the pandemic.” noted Stephanie Lin, CMO at Empower.

What became abundantly clear during the pandemic was that many Americans did not have savings put aside in case of an emergency. A unique feature introduced by Empower to help its customers deal with this was Empower Automatic Savings.

“Empower Automatic Savings uses AI to intelligently detect when you do have excess cash and will automatically move funds from your checking account into savings (where you’re less likely to spend it),” said Lin. “Our customers frequently tell us that their financial situation is so variable that it’s tricky to identify when and how much to save. When money is generally tight, and there are multiple essential demands on your money, the reflex is to postpone saving altogether.

“We created Empower Automatic Savings to make it effortless for our customers to save continuously in small increments, without having to think or worry about when or how much. All you have to do is set your weekly savings target, and Empower does the rest. If your expenses are outpacing your income one week, we’ll save only as much as you can afford to (or maybe nothing at all). The beauty is we do the trend analysis, predictive math, and automatic transfers in the background for you. And unlike traditional savings accounts, Empower allows you to withdraw money anytime, with zero penalties, in case of emergencies.”


HMBradley is the newest challenger bank on the list, having launched during the midst of the covid-19 pandemic. HMBradley aims to be the bank that finds common ground with its customers and remove the stereotype that banks are often misaligned with their customers, as they want one thing rather than tailoring to the customer’s needs.

CEO and co-founder, Zach Bruhnke discussed HMBradley’s unique features saying, “Savings tiers themselves (get paid more interest when you save more of what comes in) was a first in the industry and continues to be one of the more unique things in all of banking but we were also the first ever Credit Card to come out with dynamic rewards categories with no spending caps. We pay you 3% cashback on your top spending category, 2% back on your second spending category and 1% back on everything else. Add in the fact that if you spend at least $100 per month on your CC and we increase the APY on your checking account balance and it really is a product that works for our customers while they sleep.”

Having launched during the height of the pandemic, HMBradley has never experienced the digital market before its incredible acceleration. Bruhnke further commented on this saying the company was a “native digital experience for our users and we were able to capitalise on the massive consumer shift to digital first as a result. It’s likely COVID shifted US consumers 3-5 years forward from where we would have been from a digital expectation perspective.”

With expansion and development a priority for HMBradley, an expansion into lending will give it the edge over its competitors says Zach Bruhnke. “We’ve worked our bank deal uniquely so that we can share in the yield on the lending side of things and that is what makes us so dangerous to the incumbent banks compared to most challengers.  We have a vested interest to lend to our customers and beyond and everything we do is focused around making that happen and helping build a better customer experience as we launch new products. We’ve been able to attract customers that the big banks desperately want to keep as a result of this and it may be what makes us a major contender for years to come.”

What’s next?

While some of the originators of digital banking in the US experienced struggles, the market changes daily, and in reality, the position that HMBradley or Empower is in today is significantly different from the realities faced by Azlo and others (although credit must still be given to these companies for surviving where others did not). So now the question remains, are people more suited and more prepared for a digital banking platform and the limitations that come with it, or will they remain an interesting technology that for the most part is too expensive to sustain a new company?


  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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