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“The banking industry is ripe for change”: Fintech and the rise of challenger banks

Digital ‘challenger’ banks such as Monzo and Tandem are revolutionising banking in the UK. Wave goodbye to high-street branches − with the rise of challenger banks - it’s time to get smart with your money. Here’s how.

Start-up banks offering digital-only services threaten to drive high-street branches into extinction.

Between 2011 and 2016, the ‘big five’ UK banks − Barclays, Lloyds, RBS, HSBC and Santander − closed 1,700 branches. Brett King, chief executive of mobile banking pioneer Moven, compared bank tellers to “telegraph operators of the 19th century”. In addition, Jay Sidhu, chairman and CEO of Customers Bancorp, has described bank branches as “mausoleums”.

“It’s not even a debate that’s being had anymore,” Tom Blomfield, CEO of ‘challenger’ bank Monzo, reveals in the upcoming edition of Future Banking. “15 years ago, people were asking if there are still going to be travel agents on the high street – clearly, the answer is ‘no’.”

Disruptive technology

In 2013, the Bank of England made the process of becoming a bank easier and lowered the capital requirements. As a result, financial technology or Fintech began to revolutionise retail banking.

Consultancy firm CACI reports that UK branch visits will almost halve between 2016 and 2020. Tired of inaccurate balances, unfair charges and frustrating delays, customers are banking online.

“Monzo aims to solve all these pain points with visible control,” says Blomfield, identified as one of the top five entrepreneurs under 30 in 2013. He describes his customer base as “anyone who uses Uber or Amazon and gets frustrated when they have to fill in forms, wait on hold or visit a branch.

“They expect that everything’s going to happen in one click from their phone.”

Smartphone banking

Tandem Bank, launched with £22 million from venture capitalists, refers to its early clients as ‘co-founders’. It’s app initially links to any UK bank account and helps people manage and save money.

“We think the industry is ripe for change,” says CEO and Fintech entrepreneur Ricky Knox. “It’s time to start helping our customers to make it to the end of the month without trying to trip them up and charge them for every mistake.”

Banking is moving away from a full-service model and toward an integrated marketplace. As a result, smartphone users will potentially do everything from one app, but connect to different providers.

“When you need a mortgage, Monzo would help you get that, and if you need to switch your gas and electricity, you could that within the Monzo app as well,” says Blomfield. “You’d have this financial control centre that helps you run your entire financial life,” Blomfield adds. “In the same way Facebook helps you with your social life.”

Read the full article on challenger banks in the forthcoming edition of Future Banking.

What do you think about the rise of challenger banks?

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