Top 10 challenger banks
When the 2008 Financial Crisis shattered public trust in banking institutions, the world’s most innovative financial entrepreneurs saw an opportunity.
Banking had long been open to only a few players, but the political fallout from the crisis, combined with new technological developments, made it easier than ever for competitors to emerge. This marked the rise of “challenger banks,” or firms that upended the traditional playing fields by offering financial services through exclusively digital means.
The following 10 challengers represent the most promising firms in the industry, with the potential to continuously redefine banking for years to come.
10 | Monese
Founded in September of 2015, this company does not yet have a commercial license, meaning it cannot provide loans or credit; it is currently limited to offering money transfers and ATM services.
What Monese loses in the scope of its services, however, it more than makes up for in their span. The company offers transfers across multiple currencies to customers throughout Europe, making it invaluable for immigrants and migrant workers.
It currently relies on mobile account and transfer service programs from Contis Group, rather than having its own platform.
9 | APS Financial
Short for “Advanced Payment Solutions,” APS is technically not a bank, but it offers many of the same services.
The company was founded in 2006 for the primary purpose of facilitating e-money payments. It has since expanded its services, and in 2016 obtained a license to offer loans to consumers, traders, and small and medium enterprises.
The company has processed £4 billion of payments so far. Combined with its long experience operating outside the traditional parameters of banking, this leaves it well prepared to thrive as a challenger.
8 | Amicus PLC
Taking a more specialised approach to challenger banking, Amicus has focused on financing properties and assets.
The company made a splash in 2015 when it offered a £100 million package made up of short-term mortgages, aimed at institutional investors who used the money to buy shares in home loans. Amicus is now expanding its operations to include a wider range of banking services.
It hopes to have a banking license by the end of 2017, and will convert £30 million of debt from its lending activities into equity for banking.
7 | Monzo Bank
A recent entry to the challenger banking market, Monzo Bank only gained its full license in February of this year.
The company is notable for having developed its own banking platform. This platform offers the full range of banking activities and services, including reports on past spending habits, monetary transfers, and integration with other companies’ apps to facilitate easy payments.
Monzo’s monetary resources are still small but are growing rapidly - the company raised a total of £22 million through a combination of venture capital and crowdfunding.
6 | CivilisedBank
Another recent entrant, CivilisedBank received its lending license in May of this year.
Instead of operating branches of its own, this bank will focus on connecting local bankers with businesses in their communities. This, it hopes, will forge stronger, more trusting relationships between bankers and creditors.
The company offers its clients accounts that keep track of their transactions, deposits, savings, overdrafts, loans, investments, and foreign exchanges.
CivilisedBank plans to include 80 bankers in its network within the first five years, generating £25 million in turnover.
5 | Tandem
Designed to offer banking services suited specifically to millennials, Tandem plans to provide current accounts, credit cards, and loans by the end of the year. The company has had trouble attracting funding, which is why it will not be able to launch savings accounts for the time being.
Nonetheless, it has raised £100 million to finance its other services. Once it launches its main services, Tandem plans to differentiate itself as a company that helps its clients manage their money responsibly. This will make it invaluable to young customers seeking financial independence.
4 | Starling Bank
Like Monzo, Starling Bank is designing its own mobile banking platform, but it has the benefit of having raised more than three times as much startup capital.
The company currently has £70 million, much of which it received from the angel investor Harald McPike. Starling’s focus is on helping its customers manage their money more effectively, notably by sending them alerts when they are about to perform activities that will incur fees.
Its platform also offers comprehensive information on spending, transfers, and accounts, with updates in real time.
3 | Atom Bank
Originally offering fixed savings accounts and loans for small and medium enterprises, Atom Bank recently expanded into residential mortgages, obtaining its license to offer two-year fixed rate loans in December of 2016.
The company currently has £135 million to finance its activities, and plans to raise £100 million more in the near future. It also has access to a network of 800 mortgage providers. The only major downside to Atom Bank is its platform.
Rather than developing its own stack, the company relies on existing software from FIS, limiting its ability to provide personalised services.
2 | Zopa
Founded in 2005, Zopa is designed to connect individual lenders with others who need loans. It has already facilitated £2 billion in loans through such peer-to-peer financial services.
It is now looking to expand its mobile services to include more traditional banking, and applied for a license in late 2016. Its experience handling large quantities of money and vast network of contacts gives it enormous potential as a bank.
1 | The Contis Group
Starting out in 2007 as a prepay company, Contis expanded into e-money services in 2010, debit cards in 2012, and full banking in 2016. What sets it apart from competing challengers, and puts it in first place on our list, is its superior banking platform, which offers comprehensive information on card payments, transfers, and accounts for a variety of mobile devices.
The Contis Group’s platform is so successful that other challenger banks, including Monese, have chosen to rely on it rather than develop their own.