In the news: Challenge accepted

Traditional banks are moving into the challenger space, while challenger banks are climbing the customer satisfaction ranks and spreading into niche markets
by Bethan Rees


Previously, traditional banks and challenger banks existed separately, but now the two appear to be edging closer in their offerings. Royal Bank of Scotland (RBS) has launched Bó, its own version of a challenger bank, reports IT Pro. This follows Lloyds Banking Group revamping its mobile banking offering earlier in 2019 to include challenger bank-esque features, such as rounding up spending into a savings pot and real-time spending notifications.

The article quotes the mobile-only bank’s CEO Mark Bailie as saying that its aim is to help customers save more: “Our data suggests that three-quarters of people in the UK are living financially unsustainable lives. We want to help change this.” The research is based on anonymised data from NatWest users – RBS bought NatWest in 2000 – and also reveals that a quarter of people regularly spend more than their income. The challenger bank will, according to its CEO, help users build habits and routines to manage their finances and will allow them to fund their lives more sustainably.

Bó’s features include instant transaction notifications, a savings pot, searchable spending, and no fees for overseas spending, according to the article. However, it doesn’t have features such as roundups and bill splitting, unlike other challenger banks such as Starling Bank, Monzo and Revolut.  

The article suggests that challenger banks are still seen by many as a backup rather than a viable alternative. “One of the problems faced by digital-only banks is they get used as spending cards by their customers, who top them up when needed with their salary paid into a more standard, traditional account, suggesting some customers aren’t quite ready to make the switch to a new banking brand,” it says. “However, the average holding deposit for digital-only banks has climbed by five times, according to Accenture, but it’s still only an average £350.”

But Bó, says the article, “is built on cloud-based systems that are entirely separate to its creaking siblings’ systems". Bailie adds: “As a digital bank, built entirely on a separate cloud-based technology, Bó is also able to harness new technology and develop rapidly in line with our customers’ needs and expectations.”

IT Pro article

Challenging satisfaction

A trio of challenger banks have topped a customer satisfaction league table, according to Joanna Faith for She writes that the Which? annual survey quizzed 4,000 members of the public, ranking customer satisfaction based on how likely they would be to recommend the bank to a friend or family. First Direct comes first with 84%, followed by Starling Bank with 83% and Monzo with 82%. At the bottom of the table is Ulster Bank with 55%.

Gareth Shaw, head of money at Which? is quoted by Faith. He says: “It’s clear that consumers value great customer service and easily accessible banking – and that applies whether they prefer to bank with a mobile app or a bricks-and-mortar branch.

“Traditional high street banks would do well to learn from their rivals challenging the status quo at the top of our survey. It seems they need to up their game to ensure they’re giving customers what they want when it comes to customer service, communication and transparency.” article 

Targeting teen banking

Challenger banks can attribute some growth to carving a niche in a target demographic, reports Zach Miller for Tearsheet. Some challenger banks have a user age restriction of 18, while some are directly targeting teens and their parents. For example, Paris-based PixPay – a challenger bank for teens focused on pocket money – has just finished an investment round for expansion, according to Miller.

Other challenger banks are targeting this demographic, including Starling Bank and Monzo, which both have a teen bank account, and Revolut, which is working on a product called Youth, for teenagers. Yet another challenger bank targeting this demographic is Kard, a European challenger bank for teens. 

Miller explains the viewpoint of the United Nations, and how teen banking can help the next generation’s future. “Of the 2.2 billion children globally under the age of 18, about half of them live in poverty. The United Nations believes youth banking provides a path towards economic power and freedom. Generation Z also wields US$44bn in buying power,” Miller writes.

Tearsheet article

Do you use challenger banks? Would you or do you have your salary paid into a challenger bank? Leave your comments below.

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Published: 06 Dec 2019
  • Fintech
  • The Review
  • News
  • Lloyds Banking Group
  • RBS
  • Revolut
  • Starling Bank
  • Monzo
  • fintech
  • digitalisation
  • challenger banks

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