The diversity challenge for challenger banks

By Charlotte Coulson

The promise of challenger banks has always been to offer something different from the familiar high street names, ranging from the type of service offered to customers to how it is delivered. However currently in the UK just ten per cent of challenger banks operating here, four out of 40, are led by a female CEO – Centtrip, Neuros, Starling Bank and Picnic Bank. 

The picture is even worse across Europe, the US and the APAC region - two out of 35 banks, four of 56 and 0 of 25 respectively. All of which raises the question of how genuinely challenging banks can be. 

Challenger banks by their very nature are there to challenge the status quo, but this is much more difficult to do without real diversity throughout the business, and that should go all the way to the top. Gender is an important element of this. There is clear evidence that the more gender-diverse a senior team is, the more likely it is to avoid ‘group-think’, be more innovate and do things differently.

Some progress is being made across the financial services sector as a whole. The UK’s Women in Finance Charter has revealed that more than a third of its 209 signatories have met their targets of achieving 50 per cent female representation across the business and at Board level, with another 36 per cent on track to meet the target by the end of this year.

But this is more than simply a box ticking exercise or a ‘nice to have’. It makes sense from a business revenue perspective too. A study of London-listed companies in 2020 found that firms with at least a third of female bosses have a profit margin more than 10 times greater than those with no women on their executive committees. Furthermore, a report from management consultancy Oliver Wyman suggests that women’s financial needs are not being adequately met by traditional banking firms, creating a lucrative opportunity for challengers to carve out a niche in an already saturated market and stand out from the crowd. 

The very essence of challenger banks is to confront the status quo and do things differently to the incumbents. Ensuring diversity of thought and perspective at the most senior levels of banks is a key element to fostering an innovative culture and guaranteeing the needs of a gender-diverse customer base are met, resulting in greater business success over the longer-term.