What makes challenger banks different?
Challenger banks widen up the market and present a whole new way of banking. And apart from a few notable exceptions such as Metro Bank and Tesco Bank, they generally only have online platforms.
Why are we seeing more challenger banks now?
In general, in the UK, the financial services sector is becoming more open and more receptive to change. This includes the deregulation of the system that was initiated to bring consumers far greater choice. Alongside this, since September 2013, the Current Account Switching Service launched a guarantee to switch accounts within seven working days, instead of 30 days. These changes have created an environment which has been incredibly conducive to the growth of challenger banks.
Is the UK environment particularly suited to challenger banks?
In short, yes. This is largely because the UK doesn’t face the same stiff competition as other countries such as America which have a far more rigid approach to banking.
What are the advantages of a challenger bank?
Without having what can so often be viewed as harmful legacies and an incredibly challenging and complicated transition to digital, challenger banks come to the market with a completely clean, fresh slate. Often this means they are considered to be far more innovative as well as having far superior levels of customer service.
How you can benefit from challenger banks
It is generally considered that challenger banks are able to offer far more competitive deals as they have far leaner operating structures and significantly lower overheads. However, more than that, they also have a huge incentive to offer better deals as they require some level of investment to allow them to build their loan book and to fully function as a bank.
Why innovation helps make challenger banks so compelling
Challenger banks offer a far easier and more seamless service. This is thanks to their emphasis on integrating innovative technologies into their platforms. An example of this is the setting up of a bank account, which with a challenger bank can be tremendously easy, particularly when you compare the level of paperwork required by a traditional bank. Often, when setting up a bank account with a challenger you need only to take a picture of your ID as well as a small video of yourself. A process that can take minutes and be done in the comfort of your home.
Five reasons you should go with a Challenger Bank
With the help of some nifty innovations, challenger banks can offer some pretty compelling reasons to shift your account, including:
1) Recommendations based on your transaction data.
2) The ability to make payments to nearby friends via Bluetooth.
3) The blocking of gambling transactions from customer accounts.
4) Better security given that they have far more advanced intelligent analytic capabilities.
5) Far more nuanced insight into your spending and how you could save more.
What should you consider when using a challenger bank?
Can you trust your money with a challenger bank?
Undoubtedly, this has to be the biggest hurdle facing challenger banks who must compete with banks that have been essentially instilled on the UK high street for centuries. Whilst they undoubtedly bring huge benefits to the average consumer, individuals are still reticent to switch to digital banking, as established names are perceived as far more trustworthy and reliable.
What happens if the technology fails?
Something of a double edged sword, the very technology that can serve to enhance and support challenger banks can also cause them serious issues. Given the uniqueness of the technology, it can occasionally fail. This obviously causes challenger banks huge issues both in terms of day to day operation as well as their perceived worth in the eyes of an already reticent consumer audience.
If you are interested in learning more about the different ways to manage your money available on the market please do take a look at our blog page here which offers some invaluable resources all about managing your finances. And, of course, if you want to borrow money please do take a look at our comparison page here.