A Challenger Bank's Entry Strategy Into a New Market: A Case Study of the Danish Challenger Bank Lunar and it's Potential Entry into the Icelandic Financial Market

Abstract

The rise of digital-native challenger banks causes a global disruption as they traverse borders and disrupt the status quo in most mature and emerging markets. Challenger banks have different business models than traditional banks as they have adopted digital platform strategy models where they have become more of a financial marketplace for customers. Digital platforms face competitive dynamics different from established companies. These include high multi-homing costs and significant reductions in transaction costs. This global disruption has yet to reach Iceland, where there are no challenger banks in the Icelandic infrastructure, which offers an opportunity for a new entrant. This paper explores the entry strategy of a Danish challenger bank, Lunar, into the Icelandic financial market. The research is a case study and action research with an in-depth analysis of the Icelandic financial market and Lunar supported by interviews with nine specialists from the Icelandic financial market. This thesis concludes that significant first-mover advantages can be built in the Icelandic market, emphasizing the value of Lunar aiming to be a first-mover and acquire a critical mass of users. The research recognizes the significance of Lunar integrating the IT infrastructure in Iceland, concluding that it is necessary to become competitive in the market. Lunar’s focus should be on differentiating themselves and becoming a financial marketplace in Iceland, connecting customers to the best available financial services. They should launch with their most standard products and anchor financial literacy products with the personal finance tool and goal setting. Their point of difference should be their socially conscious products, investments, and subscription manager. The authors recommend that researchers continue investigating the topic of platform entry strategies for challenger banks into a new market