Digital Transformation has changed the established way of operating a business across plethora of industries – and banking is no exception. New start-ups keep challenging traditional service providers with a more personalised and innovative service. And although, traditional banks have been slow to adapt, they need to change it now, especially if they still want to be relevant in the industry.
Challenger banks are digital banks with no high-street branches. They are much more flexible, more user friendly, quicker to adapt to users' needs, and more personal than any traditional bank. But their biggest advantage over other well-established financial institutions is that they have been founded in the age of digital literacy, that means starting fresh with a digital offering and the use of the latest technology available. For this reason, challenger banks can incorporate new products more quickly, and with less friction through their platform business model, which can easily connect customers with new products developed by third parties. And this greatly increases customer choice.
So, which UK challenger banks are shaking up the industry? Let’s find out.
Monzo is a smart bank for the smartphone generation as it allows you to avoid visiting branches and waiting in long queues. Instead it is solely focused around the mobile app with heavy emphasis on viral features and a fresh, young brand. It can be especially seen in the bank’s newest feature - launching accounts for 16-17 year olds.
16- and 17-year-old customers can sign up for a Monzo bank account today by downloading the app. They’ll then receive a contactless debit card in the post the next working day. Certain banking features, such as overdrafts and spending on gambling, will be blocked until customers turn 18. You should know that this new offering is opening up the bank to more than 1.5 million new young people!
‘Focused on building the best current account in the world and ultimately working with a range of other providers so that Mondo can be an intelligent hub for your entire financial life.’ (Monzo)
Revolut didn’t start as a proper challenger bank. It was actually a prepaid currency card designed for use on holiday. But now, the list of its features can compete with any other traditional bank. Revolut offers its customers current accounts, cashback, crypto-trading, travel insurance, phone insurance, Euro direct debits, standing orders, business accounts, airport lounge access, a concierge service, high street discounts, and these are just some of the products and services of Revolut.
In July 2018, it was revealed that Revolut is signing up to 9,000 customers to its digital banking platform per day, and now has 2.5 million users worldwide. Moreover, the bank was the first ever challenger bank to break even last December.
‘The reality is what we're trying to achieve is [to] build a 10 times better financial services company that is 10 times cheaper as well.’ (Nikolay Storonsky, Founder and CEO of Revolut)
Starling Bank was founded by Anne Boden, who spent 30 years at UBS, and the Royal Bank of Scotland before leaving to start her own smartphone-based bank in 2014. Four years later, Starling has seen its customer base grow up to 210,000 people opening their current accounts, and hired 97 staff members in the past 12 months. Moreover, Sterling Bank is the first UK bank to launch a debit card with a vertical design. The vertical card, available for both personal and business banking customers, will be sent out to new customers, but existing customers will need to wait until their current card expires.
‘A portrait bank card reflects how we actually use our cards today; it's intuitive, instinctive, and in short: it's just common sense.’ (Mark Day, Art Director at Sterling)
Tandem Bank was on the Fintech scene since 2013. However, it only hit the headlines in 2018 when it bought Harrods Bank, picking up a banking license, £350m in deposits and 11,000 accounts in the process. The app-based bank — which previously had £10m in deposits and 100,000 users — also launched a credit card and fixed saver accounts.
‘With new products on the way we’re targeting major growth. There is a lot of noise surrounding the legacy banks moving into the digital only challenger market, which is great. However, we are moving at twice the pace and as a small agile organisation we are accelerating as we speak.’ (Ricky Knox, CEO of Tandem Bank)
Before founding Clear Bank in 2014, Nick Ogden had built and sold half a dozen successful Fintech start-ups such as WorldPay, acquired by Royal Bank of Scotland in 2002. With Clear Bank, Ogden has founded the first clearing bank — an institution that provides banking services to other banks — in the UK in 250 years.
In 2018, Nick Ogden has announced a partnership with allpay, the UK’s largest Bill Payment collections provider and leading Prepaid Card specialist.
The partnership will see allpay offer ClearBank’s cloud-based banking platform to its clients, which include central government departments, housing authorities, credit unions and debt collection agencies, and their customers.
‘Allpay chose us because of our market-leading service levels, system resilience and cloud-based, scalable platform.’ (Nick Ogden, Founder and CEO of ClearBank)
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