With the emergence of challenger banks and big tech companies, traditional financial institutions are facing a rising number of competitors in the increasingly crowded payments space. These competitors have begun to address some of the unmet needs of consumers, such as those of the largely underserved gig economy workers. However, traditional banks can find opportunities for themselves in big tech companies’ payments endeavors and through the utilization of API digitalization to streamline customer experience. To talk more about the rise of challenger banks and what to expect in 2020, PaymentsJournal sat down with Eric Brandt, Senior Market Analyst at NCR Corporation, and Aaron McPherson, VP of Research Operations at Mercator Advisory Group.   PaymentsJournalThe Rise of Challenger Banks in the Payments Space: How Can Traditional Banks Keep Up in 2020?PaymentsJournal The Rise of Challenger Banks in the Payments Space: How Can Traditional Banks Keep Up in 2020?PaymentsJournaljQuery(document).ready(function ($){var settings_ap25742165 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"25742165",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_84078_2",settings_ap25742165); }catch(err){ console.warn("cannot init player", err); } }); Digital and challenger banks took off in 2019 and are predicted to grow 2019 was defined by a combination of big tech companies—like Google, Apple, Amazon, and Uber—entering the financial services space, and the take-off of digital-only brands created by challenger banks. In 2020, Brandt anticipates the challenger banks that are “doing it right” will rise: “I don’t think that these traditional financial institutions can just create a digital-only bank and people are going to flock to it. They have to provide value and give people a reason to come and join the bank.” Big tech companies will continue growth in the space as well, especially because they are particularly good at utilizing data. This could mean trouble for traditional financial institutions because they struggle to do the same. Citing Mercator Advisory Group’s 2020 Outlook document, McPherson noted that another major emerging theme is the rise of virtualization. “We’re studying something we call ‘banking as a service,’ which is something that some of the legacy prepaid platform brands like Green Dot, Blackhawk, and Galileo are providing because many of these challenger banks are virtual brands—there are no physical assets.” McPherson added that “this has also been accelerated by the open banking regulations in the European Union, which have enabled challenger banks to gain traction and grow rapidly to the point where they are looking to expand into the United States.” He noted that while the U.S.