The long-held monopoly traditional banks held in the UK has wavered significantly in the past two decades. The advent of digital disruption has given rise to several neo-banks who have taken advantage of the digitisation that customers demanded. Several digital challenger banks like Monzo, Revolut, N26, Starling etc. have risen in prominence because of their innovative features.
Digital challenger banks are banks that only exist digitally – they have no physical branches and more often than not, offer borderless accounts for the entire Eurozone. Here are four key players in the industry today:
1. Atom
UK’s first digital-only bank with a full banking license, Atom launched in 2016 with mobile-only banking, and now has thousands of customers holding £1.5 billion in their accounts. Keeping security at the forefront, the bank app uses facial biometrics and voice recognition to allow customers access. Atom also offers competitive rates on mortgages and business loans.
Atom claims that it allows customers to create an account in as little as five minutes, the fastest for any UK digital bank. Since its launch, it has lent over £1.2 billion to SMEs and homeowners. In order to facilitate better research on technology, Durham-HQ Atom Incubator offers professional advice, space and access to a community of technology start-ups and entrepreneurs.
2. Revolut
Revolut is a digital challenger bank that launched in 2015. It offers both UK and Eurobank details to its account holders so that they can transact freely across borders. With over 4m customers, 350m transaction worth £40bn in four years, it’s no surprise Revolut’s popularity with customers is a threat to traditional banks. The bank offers a vast array of banking products and features to both individual customers and businesses, along with budget-tracking tools for monthly goals to increase savings. They also offer features such as rounding up spare change on purchases to the nearest pound to put into savings.
The main reasons for holding a Revolut bank account (and the debit MasterCard it comes with) lie in its appeal for travellers. They offer fee-free spending in over 150 countries at the mid-market or interbank rate up to £5,000, and also offer free international ATM cash withdrawals up to £200 per month.
Offering bank-level security, they also offer new age technology features such as location-specific security to track any unwanted card transactions as well as the ability to freeze and unfreeze your card in case you misplace it.
3. Monzo
Bearing the title of being UK’s second-most valuable fintech start-up with a valuation of $2.5bn, Monzo is one of the few digital banks to provide full current account facilities to its customers. Previously operating with prepaid cards, Monzo now offers debit Mastercards along with free ATM withdrawals up to £200 per month, with a minimal 3% charge on any subsequent withdrawals.
35,000 people open a new Monzo account every week, joining 1.9M existing customers. The digital bank offers several lucrative travel benefits, ranging from fee-free spending to conversions at the interbank rate for smoother foreign transactions. Partnering with TransferWise, customers can send money abroad at 8x cheaper rates. Their current account offers flexible overdraft facilities, along with the ability to set up direct debits and standing orders. Customers can also save using ‘Pots’, which are sub-accounts for goal-tracked savings. In a bid to encourage savings among customers, Monzo also introduced the 1p Savings Challenge, allowing users to stash 1p the first day, 2p the next and so on, into specific Pots via the app. Using IFTTT (If This Then That is a web-software to automate tasks across apps, services and devices) Monzo also has a variety of initiatives that range from reminders to drink water two hours after buying coffee to weekly spending digests that help customers better track their finances.
4. N26
Valued at $2.7b, German digital challenger bank N26 is one of the most valuable tech start-ups to emerge in the last five years. N26 has impressed both its customers and critics with innovative features and has received several awards for its sleek and accessible interface. With 2.5 million customers across 24 countries in the Eurozone, N26 also has plans to launch in the US soon. Their unique ‘Spaces’are goal-tracking sub accounts for savings that’s used by 165k customers and currently holds €130m.
One of the few digital banking apps to provide the ability to set savings goals & add funds to it within the larger app, it also provides several benefits for nomads and frequent travellers. From unlimited free ATM withdrawals in the Eurozone for free account holders and free unlimited ATM withdrawals internationally for N26 Black account holders to no-conversion fees on foreign transactions, N26 customers can travel across the world without facing any problems. Their partnership with payments start-up TransferWise allows their customers to send & receive money in 19 currencies at the interbank rate which is 6x cheaper.
Recently, N26 launched a tech hub in Vienna with a focus on protection against fraud and money laundering. Currently the 3DS Mastercard SecureCode adds an extra layer of security for online payments.
The increasing demand from customers for more digitally-accessible banking features and services has led to the rise of digital banking in the UK. While these four are the key players, major competitors such as Starling and Monese also offer a variety of services to customers. In the same vein, personal finance management apps have garnered a lot of popularity in recent times as they work in tandem with digital banking apps to provide a holistic banking experience to customers. To read more about which personal finance apps are currently making waves, check out our article: These 5 Apps are Reinventing Personal Finance
Penser is a specialist consulting firm focused on fintech, payments and open banking. We provide strategic planning, digital transformation, and due diligence services.