Since the 2008 financial crisis, the UK public has been left rather disappointed with the behaviour of the big four banks (Barclays, RBS, Lloyds and HSBC). Bailouts, high bonus payments after the bailouts, derivatives mis-selling, the LIBOR scandal and a regular lack of good customer service has given rise to so-called challenger banks, which aim to provide a more efficient and customer-friendlier digital banking experience. In this post, you will be introduced to the new mobile-only digital challenger banks looking to shake up the UK banking landscape.
Atom Bank is the UK’s first digital-only bank with a full banking license. It launched its mobile-only banking service in April 2016 with a fixed-term savings account with more to come throughout the year. “By the end of 2016, customers will have access to fixed savings, current accounts, overdrafts, debit and credit cards, instant access savings and residential mortgages, all serviced via the app,” according to Chairman and Atom Bank founder Anthony Thomson, who also co-founded Metro Bank.
Atom Bank has received backing from Spanish bank BBVA, who hold a 30% stake, fund manager Neil Woodford, venture capitalist Jon Moulton and former Goldman Sachs Asset Management Chairman Jim O’Neill.
Fidor Bank UK started its operation last September with the launch of an online current account and savings bonds. Fidor Bank UK is a subsidiary of the German customer-focused digital retail bank Fidor Bank. It was founded with the intention to change the way retail banking works by letting the customer build the services and products they want to use. They focus heavily on the use of social media and the opinions of their online community to improve their digital banking services. Chairman and CEO Matthias Kröner founded Fidor Bank AG in 2009. In July 2016 French Bank BPCE acquired Fidor Bank making it one of the first European challenger banks bought by a traditional financial institution.
Monzo is a digital-only bank that wants to create a user-friendly, data-driven approach to personal finance with its mobile banking app. Monzo was founded by Tom Blomfield, following his exit from rival challenger bank Starling, in 2015. Monzo’s banking app will offer a real-time breakdown of your spending habits, mobile money transfers, integrations with the likes of Transport for London, Uber and online wealth management service Nutmeg, some AI layering to better predict your banking habits, no foreign exchange rates and potentially biometrics for security. CEO Tom Blomfield wants to make Monzo “the Google or Facebook of banking”. Monzo was originally called Mondo Bank but ended up changing its name in August 2016 after a legal dispute over the original name.
Monese has created the first mobile-only UK current account, specifically for migrants and expats. It allows anyone with a smartphone and an EEA address to set up a UK bank account “in under 3 minutes”, receive a VISA debit card and conduct low-cost international money transfers.
Monese was founded with the intention to provide easy account opening for people who have just entered the UK and have been deterred by the lengthy onboarding processes of the big high street banks. Estonian entrepreneur Norris Koppel founded Monese in 2013 after he himself struggled to open a bank account when he first entered the UK.
Starling Bank is another contender in the mobile challenger banks sector looking to shake up the UK banking landscape. Starling has received its banking license in July 2016 and is moving closer towards launching its first product. Starling will start out with a mobile current account and ‘smart’ money management features, such as alerts to help customers avoid incurring unwanted fees. Anne Boden, the former COO of Allied Irish Bank, founded Starling in 2014.
Tandem Bank is a mobile-only customer-centric bank, which received its banking license in 2015 and is yet to launch banking products. Tandem differs to its competitors as it intends to focus not only on providing seamless digital banking services but also to help its customer proactively manage their money. This will come in the form of notifications if you miss a payment or approach your overdraft, as well as preferred rates for different savings and investment services, both with Tandem and other banking services providers. Tandem Bank is currently aggressively expanding its team and is looking to hire in a range of different departments, including product management, marketing, treasury, underwriting, and compliance.
Ricky Knox, Matt Cooper, and Michael Kent founded Tandem Bank in 2013. Deputy CEO Ricky Knox is a serial entrepreneur who founded several start-ups in the fintech and telecoms space, including remittance company Azimo. Matt Cooper is Tandem’s Chairman and a former director at Capital One Bank. The third co-founder Michael Kent, who co-founded Azimo with Knox, acts as a Non-Exec at Tandem.
Tandem Bank has since raised tens of millions of pounds from high-ranking backers, including Ebay founder Pierre Omidyar, and managed to raise £1 million within 15 minutes via its crowdfunding campaign in May 2016.
Challenger banks will benefit from mistrust of big banks
Challenger banks have been able to benefit from a lack of past mis-selling and archaic technology platforms, both of which have bogged down traditional lenders, according to the FT. This has opened up the opportunity to take away customers from the big four banks and acquire the young smartphone-savvy banking customers of the future.
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