How to Build a Challenger Bank

In 2018 Healy Hunt were contacted by the founder of a new Challenger Bank who was seeking insight. Despite a stellar career, the CEO-in-waiting had, understandably, never built a new financial institution from the top down before and at that stage his only other staff member was the Chief Financial Officer. We had been recommended to him by a senior banking executive for our expertise in this area. Our first meeting eventually led to a strong and successful relationship.

Building a Bank from the Top Down

The new company’s concept is to provide the instant fingertip control of banking apps but, rather than use technology to replace personal customer service, it will be used to support it. Retail and business deposit account holders will enjoy a traditional, local banking model supported by genuine relationship managers. Unique technology infrastructure will strip out clunky processes thus empowering customer-facing staff and giving clients a joined up, streamlined service with the best features of the old and new banking worlds.

Working with the New CEO

The first meeting was consultative rather than a sales pitch as the CEO wanted to gain insight into the challenge of staffing his company. It soon became apparent that the relationship would be mutually beneficial as this was a client who was ready to listen, collaborate and draw on our expertise in the approach to building a team as well as sourcing key individuals. From the outset, it was clear that achieving a cultural fit with his view of the market, his vision and his values would be critical in order for any candidate to be successful.

Cashflow is always tight when setting up a new institution due to the long period without revenue generation. We proposed some flexibility in our approach and pricing in return for exclusivity on an agreed number of senior appointments across our core functional specialisms which essentially includes everything except key IT roles. Our logo in the diagram below denotes the roles we have filled so far. Others have been filled based on internal recommendations.

organisation chart of a challenger bank

The Board

Based on our insight, we started by placing high calibre individuals to the board. It is important to establish a credible board featuring people with significant track records because, not only does it help the company stand out from the crowd, but it gives the regulator greater grounds for granting a banking licence. As is usually the case, at least one of these appointments was accepting their first non-executive role. The transition to a less hands on, non-exec position is difficult for some people to make and it is part of our responsibility to prepare the candidate for what to expect. Roles filled included:

  • The Chairman – a former Chief Executive of Corporate Banking at a major institution.
  • The first Non-Executive Director – a former MD of Commercial and Corporate Banking.
  • Chair of Risk and Audit – a former Deputy Chief Executive at a top FinTech.

The Executive Team

The cashflow pressure on start-ups sometimes leads them to hire candidates with potential rather than a proven track record. This tends to be a false economy and in key functional positions, a start-up is a bad place to be learning on the job. In the cases of a Chief Compliance or Risk Officer it is far better to take somebody who has worked at the highest level for some time and has established networks within the regulatory environment. The CEO accepted this argument and took the strategic view to recruit established leaders in their roles.

This still left us with challenges. Some individuals are not suited to the start-up environment, regardless of previous achievements, and don’t perform so well away from the siloed environment of a larger company. Even for those who are identified as having suitable track records and the psychology to perform in a start-up environment, there is still the challenge of the new compensation package. Moving from a heavy 6-figure salary and matching bonus to a smaller salary, with equity bonuses contingent on success, is too uncomfortable for some people. An ambitious MD or Commercial Banker may be happy to take the gamble but in Risk and Compliance disciplines it is harder to find people who are prepared to leave comfortable positions. But it is possible. Here are some of the roles we have filled at the executive level:

  • Head of Credit
  • Chief Risk Officer
  • Chief Operating Officer
  • Head of Compliance

As explained, we didn’t always go with the best technical fit but always with an excellent candidate with proven technical and leadership ability and whose market outlook and values matched those of the CEO. This relationship has now reached a stage where we would expect to place fewer candidates and if we were required to place more, it would mean we hadn’t done our jobs properly to this point. Many of the big-hitting staff coming in have brought their own recommendations for positions and, although our recommendations have been preferred on more than one occasion, the rest of the leadership team is now likely to be filled internally. As the recruitment challenges become more volume based and less senior, our role will be to fill the more challenging and specialist positions that arise.

This kind of specialist engagement is challenging and rewarding. We are proud of the work we have done with this client and delighted with the strong working relationship we have established.

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