Banks have been making easy money from their customers for a long time. Now there are challenger banks in the UK that offer their clients solid banking services with no-frills pricing.
There are a few great challenger banks in the UK, and you might want to consider using one for your daily banking needs.
Most of these challenger banks were launched in the wake of 2008’s wild crisis, and in some ways, they have been helped by the public’s growing distrust of the established banking players. Now that it looks like Negative Interest Rate Policies (NIRP) are here to stay, and established banks have less to offer their clients than ever before.
In addition to offering some of the most basic banking services that people need every day, challenger banks have worked to create options for their clients that are next to impossible to find with normal retail banking accounts. Some challenger banks offer multi-currency accounts, as well as low priced international transfers.
Challenger Banks are Growing
It is estimated that challenger banks in the West currently have around 20 million customers and that number is expected to grow exponentially in the next five years.
The Big Three Challenger Banks, including Revolut, N26, and Monzo, are on the verge of rolling out their international expansion plans into the US and other markets. All three currently have operations in the UK
Revolut, N26, and Monzo had a combined customer base of about 13 million customers in Q3 of 2019. Also, UK-based Starling had 1 million customers by the end of 2019. Europe is leading the charge in this industry, both from a growth and mindshare perspective.
The founder of Revolut told Sifted at a recent conference organized by Unbound London:
“We are three/four years more advanced compared to US companies in terms of product, in terms of regulation, in terms of size. US companies should learn from Europe.”
All the Big Three Challenger Banks are expanding into the North American market in the coming years. If their success in the UK and Europe is any guide, these companies are primed to make a killing in the coming years.
As PiDatametrics reported, “Challenger banks have grown in search by 32% between Jan 2016 – Jan 2019, whereas traditional banks have seen a 22% decline in the same time. Revolut the most searched challenger bank between 2016 – 2018”
Challenger Banks that Might Work for You
N26 and Revolut are probably the two best known financial technology or ‘fintech’ players in the UK market right now. They have no high-street presence and operate entirely online with customers accessing their accounts via intuitive, user-friendly apps on their smartphones.
Here is some background information on popular challenger banks:
Revolut was launched in 2015 by Nikolay Storonsky and Vlad Yatsenko, who is the son of a Gazprom executive. It has grown into a formidable business that offers its customers great banking solutions.
The UK-based firm has a more limited license than some rivals, operating under a specialized bank license via Lithuania, not as a full bank. That means Revolut can offer a current account for deposits and basic debit cards, but it also has some limits on the types of investment it can offer.
Revolut is a digital-only banking app and a card with a focus on technology, low fees, and flexibility. It is especially aimed at those who travel a lot, offering spending abroad and international money transfers with no hidden fees. Revolut has more than 8 million customers, and according to Revolut, it has completed more than 350 million transactions with a total value of over £40 billion.
Revolut offers a UK current account, a Euro IBAN account, and a debit card when customers open a standard free account. It provides usual banking services and allows its clients to withdraw money from ATMs in many nations. Clients also get low-cost international money transfers, fee-free global spending, and access to a cryptocurrency derivatives exchange.
Revolut has been expanding into new markets. Besides its home market in the U.K, Revolut is available across Europe. In 2019, the company expanded to Singapore and Australia. It currently has at least 8 million users, according to company data.
In September 2018, Revolut announced in September 2018 that it would launch in New Zealand, Hong Kong, and Japan, it also announced that should launch in the U.S. and Canada by the end of last year. In February 2019, there was negative publicity surrounding an alleged toxic work culture at the company, which was reported by Wired magazine.
There have also been some concerns about possible connections between the firm and the Kremlin, though there as been no firm evidence presented to confirm any sort of malfeasance.
Established five years ago in Berlin, N26 is a fully licensed German bank, which can be used by anyone in the UK, Europe, and the United States. N26 has more than three and a half million customers in over 27 countries.
N26 has a UK banking license and provides customers with a UK account number and sort code, which facilitates direct deposits and payments. The company operates in Ireland and other EU countries on a European Banking Passport
N26 customers are covered by the German Deposit Guarantee Scheme up to €100,000 so your money is as safe with this bank as with any of the traditional Irish ones. Like most challenger banks, N26 provides services that connect directly to a smartphone. It offers many of the most common banking services that people need.
One of the reasons why banks like N26 are attractive is because of its low cost of doing business. N26 does not have physical bank branches, which helps keep its costs lower than what a high-street bank could offer.
Last January, the Berlin-based startup announced a $300 million USD funding round and raised another $170 million USD last July. The company is now valued at $3.5 billion.
N26 has launched several tiered accounts, including N26 You, Metal, and Business You. N26 You is a premium bank account that comes with travel insurance, N26 Metal offers a stainless steel debit card, and N26 Business You is a free bank account for freelancers that comes with 0.1% cashback on all purchases and free international spending.
Ways to Take Advantage of Neobanks
If we take a look at the costs that are attached to using a challenger bank, it is easy to see that they are aiming their services at retail banking customers that don’t need much more than a payroll account that lets them spend their money on regular things like food and rent.
These banks may make sense as a spending account that is funded by an existing account at a traditional bank, as they are a great way to insulate your primary accounts from hacking or other kinds of fraud.
There are also options for people that don’t live a traditional lifestyle and travel a lot. You will still need to have a residence to qualify for these banks, but you may be able to use a friend, or family member to establish these legal requirements.
Overall, challenger banks are giving retail banking customers lots of new options, and are probably a better choice if you are comfortable dealing with a bank via an app, and not having the option to visit a physical bank branch.