The banking industry is going through a huge upheaval and with over 20 challenger banks applying for banking licenses, and five listing on the London Stock Exchange in the last year, bricks and mortar banks are understandably rushing to innovate and keep up.
These new digitally focused challengers are revolutionising banking by offering digitally accessible services and unique customer experiences, which are particularly appealing to millennials who, according to statistics, are estimated to check their smartphone 43 times a day.
But who are these challenger banks and what are they offering? bobsguide investigates below.
Atom Bank is one of the most well-known challenger banks, firstly because it was established by Metro Bank founder Anthony Thompson, and secondly because it has raised millions of pounds in investment from renowned investors such as Neil Woodford. The digital-only bank is also the only mobile bank to acquire a banking licence from the Bank of England and since obtaining this licence in June, is working hard to launch by the end of 2015. The Atom team are already 100-strong and are led by former First Direct CEO Mark Mullen. According to reports, the app has been thoroughly tested and will continually be developing but is said to utilise biometric security and provide a 3D interactive experience for customers. “Biometric security and end-to-end in-app account opening are just some of the features being developed to deliver a branch-free, paper-free and stress-free bank,” said Atom in a statement.
Led by former chief operation officer (CIO) at Allied Irish Banks Anne Boden, Starling bank recently raised £10m to fund the launch of its mobile bank app, despite facing some management issues at the beginning of the year when CIO and co-founder Tom Blomfield left the company. The bank is seeking to launch in 2016 and is specifically targeting the current account market. Although not forthcoming about what the app will offer, reports suggest that Starling bank will be aimed at customers aged 20 to 40 and will provide personalised insights into their finances such as how much money they are spending on clothes and eating out each month.
German digital bank Fidor, is the latest UK entrant after launching here in September. The bank uses a community-based approach and asks members what services and products they want. Fidor has over 100,000 customers in Germany and offers core bank services alongside peer-to-peer loans and foreign exchange transfer through partnering companies. “53 per cent of people do not think their bank offers anything different to other banks and better banking needs to be customer-centric, integrative, open (both culturally and technically) and efficient,” Matthias Kroner, Co-founder and CEO, Fidor Bank said at Sibos this year.
Created by Tom Blomfield, former CIO and co-founder of Starling Bank, and supported by Eileen Burbridge, Partner at Passion Capital, the leading early-stage technology venture capital investment firm in Europe, Mondo has had hundreds of people sign up to test the app that customers can use to control their current account. Mondo will be releasing around 500 pre-paid debit cards from the app this month and is seeking to have its banking license by early 2016, in a bid to release a current account afterwards. The app enables users to see how much they are spending, how much is left in their account, the effect this spending is having on their account balance over the month and offers an overdraft if they run out of money. The app also automatically pulls data on the location, type of shop with pictures and hashtags after every transaction and uses data to spot anomalies in regular bills etc.
London-based start-up Monese enables people to open a bank account anywhere in Europe via their smartphone and currently has a waiting list of over 55,000 possible customers. Monese is targeting migrants, who find it difficult to open bank accounts quickly when they arrive in the country. The platform is able to check the identification of anyone in Europe and can verify users identities with a picture of their passport and a selfie. The company says that they are different to other mobile banking platforms because they are focusing on migrants rather than retail banking customers, and are working with banks across Europe. Monese has been issued with an e-money licence from the FCA, which only allows them to hold customers money, rather than invest it like a bank.
Tandem has been flying relatively low on the radar, however, the digital bank has hit headlines recently for recruiting a number of prominent figures from the banking industry. This week Sky news reported that Michael Amato, a non-executive director of Santander UK, is expected to step down in the coming months to take up a role on the board of Tandem, alongside John Maltby who recently stepped down as chief executive of Williams & Glyn. Previously, the challenger bank also hired Peter Herbet, former GE Capital executive and chief financial officer of Barclaycard, to be its first chief executive. Founded by Ricky Knox, technology investment expert and co-founder of Azimo, and Matt Cooper, founder of the Capital One Credit Card business, the bank is expected to have mobile and digital channels, alongside a call centre.