Disillusion with mainstream banks following the 2008 financial crisis and the rise of digital has created space for a new kind of banking provider. Enter the challenger bank. Tech-enabled and consumer-centric, these digitally focused and agile players are set to disrupt the retail banking space. In this post, we take a look at five of the best including Atom, Tandem, Fidor, N26, and WeBank.
Atom Bank became the UK’s first digital-only bank, after receiving its banking license late last year. Atom is built exclusively for mobile – the only way to interact with the bank is through the Atom app.
Atom’s core focus is on providing cutting-edge digital functionality to make life easier for customers. For example, it promises to use voice and face biometrics to make the traditional log-in process speedier and more secure, and to harness machine learning and AI to optimise its customer service. Atom’s CEO Mark Mullen promises that their “approach will be to constantly evolve and extend our offering, with monthly updates to our app and a dedication to providing better value.”
Atom’s first savings products are already available to the public and the bank aims to expand its range to include instant access savings, mortgages and current accounts in the near future.
Tandem Bank, another UK-based, digital-only bank, received its banking license from The Bank of England earlier this year. Whilst Atom focuses on technology, Tandem positions itself as a “good bank” – one works for the benefit of its customers rather than purely in its own interest. As Tandem CEO and founder, Ricky Knox, puts it: “the really big difference between us and Atom is that they are very focused on the mobile experience as the driver for everything they do. Our focus is on customer outcomes and getting a much better deal for our customers.”
Tandem aims to help consumers make their money go further, by proactively helping them manage their money. This could take the form of sending customers notifications when they’re nearing their overdraft or giving them preferred rates for alternative savings and investment services.
Another way Tandem is living its ethos of putting its customers first is its co-founder network: a community of consumers who have helped to build the bank together with Tandem employees since its inception.
Fidor Bank is digital bank founded in 2009 in Germany. At Fidor Bank’s core is the idea of community and this plays out in a number of ways.
The bank has done away with” financial advisers” and instead provides its customers with an online space – a community – for consumers to share financial advice with one another. To incentivise customers, the bank offers cash rewards to those that take part.
But perhaps the most innovative aspect of Fidor’s offering is that the interest rate on its new current account will be linked to the number of Facebook likes on the bank’s page. For every 2,000 likes the bank receives on Facebook, it will increase the interest rates they offer to savers, rising to a maximum of 0.5%.
N26 promises to help customers run their entire finances from their phone. With a full banking license to operate across Europe, N26 has already attracted over 200,000 users in 8 European countries.
N26 provides a number of innovative features to provide its customers with a better deal than they might typically receive from more established retail banks. Customers have access to a simple and flexible investment platform, built into the app. They also benefit from a partnership with TransferWise to provide cheaper rates when transferring money abroad.
Perhaps fintech’s most important contribution to the world has been its ability to provide financial services to hundreds of millions of people across the globe without access to traditional financial services. The most visible players driving this trend have been microloan providers or payment platforms. Fully formed challenger banks have been slower to adapt their offerings to non-traditional customers, but a few players are beginning to emerge.
A notable example is WeBank, a Chinese challenger bank launched by East Asian internet giant Tencent Holdings. Founded in 2015, the company has recently completed a funding round of $450 million, and although regulators in China are still in the process of granting them a full retail banking license, its existing microloan and investment platforms have proved hugely popular amongst consumers who would normally not have access to such products. This has been facilitated by WeBank’s ties to Tencent’s flagship platform, the wildly popular messaging app ‘WeChat’, which has 650 million users in China. Investors believe that WeBank’s immediate access and visibility to such a huge customer base will ensure rapid take up of its banking offerings, including tens of millions of unbanked customers.
Whilst each of these five banks has a unique offering which differentiates them from the competition, there are common themes that link all of these challengers together. They all work collaboratively with customers to provide a service that suits their needs, appeal to a younger and more tech-savvy audience through a mobile-first banking experience and take a more ethical approach to banking that actively helps the consumer. These exciting new players have the potential to revolutionise the way that banking is done today and we can look forward to future innovation in this space.