Since challenger banks have their own banking license, they can be considered safe. But to better assuage user fears, they often partner with traditional banks to provide better financial protection. They do so through banking-as-a-service (BaaS) infrastructure. In this business model, challenger banks rent a banking license and security features from an established bank, which gives their customers deposit insurance protection.
On the cybersecurity side of things, challenger banking apps have built-in features to keep client information private. Some use fingerprint scanning instead of passwords or require two-factor authentication (2FA). Others issue real-time alerts every time someone accesses a customer’s account, give the option to lock or freeze a lost or stolen debit card, or provide zero liability for unauthorized debit card use.