Digital disruption is here to stay, and financial firms of all kinds should be celebrating — from traditional brick-and-mortar institutions to the hungriest of challengers.

This may sound like a daft premise to the many who have predicted that digital contenders like PayPal, Apple and Square as well as challenger banks such as Virgin Money will be the downfall of traditional firms. To the contrary, I'd argue that there is room for everyone at the financial services table. Moreover, the profound disruption that has led to the rise of challenger institutions can ultimately drive innovation across the industry.

Challenger banks are gaining a solid foothold in the industry by offering more personalized products and customer experiences as well as a high level of convenience. New digital banking options such as GoBank as well as other payment services such as PayPal and Venmo have a unique competitive edge. They are built specifically for the purpose of online and mobile service delivery, while banks tend to layer mobile and online capabilities on top of their long-established brick-and-mortar operations. The challengers are lean, agile, and equipped to turn on a dime, enabling them to rapidly introduce new services and test new strategies.

There is no question that challenger banks appeal to many customers, especially younger demographics. A 2014 study by Viacom Media revealed that 73% of the more than 10,000 millennial respondents said they would rather handle their financial services needs with Google, Amazon, Apple, PayPal, or Square than via their own nationwide bank. Furthermore, nearly half are counting on tech startups to overhaul the way banks work.

So how is this good news for traditional financial institutions? First, there's nothing like the emergence of new competitors to spur innovation among traditional contenders. Clearly, business as usual is no longer a viable strategy.

Traditional firms face some strong headwinds when it comes to making rapid change. They face stringent regulations and greater organizational and technological complexity. However, they also have some powerful assets that are often overlooked. These include strong security systems, longstanding customer relationships, established delivery channels — such as call centers, online banking, highly visible branches and brands, and increasingly sophisticated online and mobile delivery channels — and the expertise and structures required to operate in a highly regulated environment.

In addition, traditional lenders offer the opportunity for face-to-face interaction. This appeals to an unlikely audience: younger customers.

Signs suggest that millennials may not prefer all-digital, all the time. One recent study revealed that millennials overwhelmingly choose face-to-face meetings as the top choice for communicating with colleagues. Similarly, over 80% said that communicating through face-to-face meetings is critically important to maintaining relationships at work—more so than phone, email, instant messaging, texting, social network sites, and video chat. These preferences may well translate to elements of their transactional relationships.

The branch also remains an important channel even among younger customers. According to the J.D. Power 2015 U.S. Retail Banking Satisfaction Study, "branch usage among Gen Z customers is on par with that of Gen X and Gen Y, as 76% of Gen Z customers have visited a branch in the past 12 months, compared with 72% of Gen Y customers and 74% of Gen X customers."

Ultimately, challenger and traditional banks are on two ends of an evolving continuum, with each group moving closer toward the center. Challenger banks must continue to invest in security and regulatory compliance while exploring new ways of providing in-person interactions. They must also be prepared to face new levels of regulatory requirements and scrutiny as legislative and legal paradigms catch up with the digital economy.

Conversely, traditional financial institutions need to break out of the brick-and-mortar behaviors of the past and build innovation into the very core of their business, rather than tacking it on as a mobile-app afterthought. As these two types of banks progress, we will see the dichotomy between them shrink, and thus the bank of the future will emerge.

As they continue to slide across the continuum, one thing will remain a constant and critical component for success: the customer experience. Both banks and challengers need to truly focus on drawing the customer toward their services rather than pushing products out. One thing remains certain: the only path to the future is through achieving extreme agility to meet modern customer needs.

Mark Atherton is group vice president of financial services at Oracle.