5 Challenger banks looking to change the face of banking
Retail banking is no longer the premise of the ‘Big Five’ – HSBC, Barclays, Lloyds, The Royal Bank of Scotland (RBS) and Santander. These established firms have been gradually adopting innovation, from online banking to Artificial Intelligence, but they’re not just competing against each other. There are new players on the scene – and they’re entirely digital. With no association with the 2008 banking crisis or complicated legacy systems, these mobile-only, ‘smaller challenger’ banking companies are honing in on the Big Five. Which of these young, digital banks are shaping up to be the most disruptive?
Tandem was founded in 2013 and received its full licence from the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) two years later. According to co-founder Ricky Knox, Tandem isn’t just a banking app – it’s a service that will help customers make their money go further. It aims to achieve this by sending notifications when payments are due, for instance. Tandem is marketed as a bank that genuinely wants to help customers, which some might say far removed from the traditional image of greedy bankers – let’s see if it can live up to that promise. Tandem has already raised over £100 million in capital, but is keeping quiet about its future strategy.
2. Atom Bank
Atom Bank is based in Durham and was launched in 2016. The startup is chaired by Anthony Thompson, who also co-founded Metro Bank (another successful challenger). Atom’s mobile app was built on existing IT systems using the Unity gaming platform. By the end of the year, the bank aims to offer fixed savings, current accounts, overdrafts, debit cards, credit cards, mortgages and instant access savings accounts. Atom plans to cater for both individuals and corporations. The app uses facial and voice recognition for security and identification, as well as integrated biometrics. As of 2016, Atom had raised £135 million in capital.
Starling Bank has headquarters in London and was set up by banking heavyweight Anne Boden. At the beginning of the year, the startup had received over £70 million in investment. Much like Tandem, Starling will send notifications to customers to help them organise their savings, and will use open APIs to empower customers. Unlike Atom Bank, Starling is building its IT systems from scratch. The company believes that an entirely new approach is needed if the current challenges of banking are to be overcome.
Previously called Mondo, Monzo was set up in 2015 by a group of founders formerly of Starling. In March 2016, Monzo raised £1 million in just 96 seconds through Crowdcube, making it the quickest crowdfunding campaign of all time. Until 2017, Monzo will operate under a restricted licence granted by the FCA and PRA. At the moment, the banking firm offers prepaid debit cards, and has released an app for both Android and iOS. In September, the Android version of the app was made publicly available. Unlike Tandem, Monzo is known for its openness concerning future plans.
5. Fidor Bank
Fidor Bank was founded in 2009 in Germany in an attempt to restore confidence in retail banking, turning its sights on the UK in 2015. It offers two personal banking products, a ‘Smart Current Account’ as well as savings bonds. Fidor has won a number of awards for its innovative approach to banking, and interacts directly with its customers via social media sites. Fidor, much like the other banks in this list, is offering personalisation and accessibility on a far greater level than established banks. . . at the moment, anyway.
It’s easy to see why these smaller challengers are so popular, with simple account options, personalisation and constant accessibility. New digital-only banks present a challenge to the established order of finance – without previous involvement in banking scandals. These new players are offering an alternative to the Big Five, potentially contributing to the fall of their monopoly. It looks like the only way is up for smaller challenger banks, but there are some serious considerations to be made. For instance, using voice recognition as a security check is no longer viable now that Adobe has created voice imitation software. As well as this, the security of open APIs has come under question. As is more and more the case, the main obstacle for new digital-only banks is to address cybersecurity before customer confidence wavers.