Challenger banks are newer banks equipped with the newest technology and on a mission to woo consumers away from the UK's main conventional banks, which include Barclays, HSBC, Lloyds, NatWest, and Santander. You may also come across challenger banks referred to as neo-banks, digital banks, or fintechs.

The creation of robust competition in the banking industry by challenger banks is something that the government actively promotes. Following the global economic crisis that began in 2008, the government investigated the banking sector and, in 2012, provided suggestions to the banking industry on how it may be improved and made more secure going forward. The proposals called for loosening up the regulations to make room for new competitors to join the market. British challenger banks were able to thrive due to these developments, as well as rewards for innovation and expansion and incentives for switching financial providers.

How Do These New "Challenger Banks" Differ From The Traditional "High Street" Banks?

Most challenger banks have just been around for the last ten years, and in comparison to big street banks, they are far smaller. For instance, Monzo was established in 2015 and had a workforce of fewer than 2,000 people (at the time of writing). On the other hand, Barclays was established in 1690 and now has over 83,000 employees.

Some challenger banks provide the same services as conventional banks. In contrast, others are digital-only businesses specializing in a certain financial product or service, such as business banking, mortgages, or loans. Most challenger banks operate only online; however, this is only sometimes the case.

Examples of Challenger Banks

Challenger banks like Monzo, Starling, and Revolut are quickly becoming well-known brands in the United Kingdom. The three first catered primarily to individuals but have expanded their services to include accounts for smaller companies.

Some challenger banks, such as Tide, Coconut, and Anna, provide specialized services to their customers. These challenger banks specialize in providing current business accounts and financial administration solutions. Banks like Virgin Money and Metro Bank that have been in operation for a longer period are also regarded as challenger banks.

What Is An Online-Only Account?

You may apply for and maintain an online-only bank account fully online, either by logging into your account on the bank's website or using the bank's mobile banking app. There is a significant distinction between the services offered by online-only providers and those offered by high-street banks; however: online-only banks do not have physical locations. Whenever you have a question or concern, you may contact customer support by live online chat, text messaging, email, or even the phone.

How Exactly Are Challenger Banks Affecting The Traditional Banking Sector?

The banking sector in the UK benefits from the healthy competition that challenger banks are fostering. Traditional financial banks are fighting against the competitive threat posed by challenger banks by enhancing both the quality of their products and the competitiveness of their pricing.

Before the year 2012, we had a restricted number of options for both our personal and commercial banking. Many services are available to cater to how you want to conduct your banking in this day and age, as well as helpful features like app alerts and expenditure categorization that were nonexistent until very recently. And if you are not satisfied with your chosen bank, switching to another service provider is now simpler than ever, thanks to the Current Account Switch Service.

If there is a disadvantage to having more businesses vying for our business, selecting an account takes a little more time. However, it is important to take the time to consider what you want and what is currently accessible to choose an account that is a good match for either you or your company.

How Long Does The Process Typically Take When Opening An Account With A Challenger Bank?

Opening a brand-new account with a challenger bank could take just a few minutes. How is it that digital banks can establish an account so quickly? Because the technology can now perform at breakneck speeds.

A selfie or video can now be matched in a matter of seconds to your photo ID, which is typically a passport or driving license. You can be verified electronically by having your information checked against national databases. In the past, banks were required to check your photo ID in person at a branch location. Banks can now verify your address by checking it against the electoral record, while in the past, you were required to present proof of your residence in the form of a utility or tax bill. If it's not too difficult to find you on the national databases, then it should take a maximum of a few minutes to get your account number and sort code.