October 6, 2016
When FinTech turned banking into a seamless experience instead of a chore, former bankers and talented entrepreneurs around the world created a whole new approach to the banking business, eliminating the physical component of a financial institution and focusing on the channel most important to modern consumers – mobile. A range of countries can ‘brag’ about national challenger bank ecosystems, but there is a particular country ahead of the world – the UK.
Not only has the capital of UK long been considered one the world’s leading FinTech hubs, but the mobile-only bank ecosystem in the country is one of the most competitive and advanced. A wide stream of investments in the country’s FinTech ensured organic growth and evolution. In fact, in 2014, $66 million were invested in London FinTech, making it the third leading financial technology location worldwide after Silicon Valley ($1.5 billion) and New York ($600 million). Some of the most successful and well-known VC firms are keeping a close eye on UK’s FinTech and are fueling the ‘fertile ground’ of the country to harvest groundbreaking result.
The abovementioned challenger banks are a global phenomenon, but the UK’s challenger bank industry can be considered one of the most developed and promising. Let's look at some examples of the most interesting and successful players in the segment:
Atom is a startup bank. It has been authorized with restrictions by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. As a mobile-only challenger bank, Atom brings biometric banking to the UK using biometrics instead of passwords in their innovative mobile app. Atom Bank was listed at number eight in KPMG’s Global FinTech Innovators 100. Spanish bank BBVA owns almost 30% of Atom’s stakes. Based in the City of Durham, Atom is working with its partners to bring pioneering technology to Europe for the first time. Atom is building the UK’s first bank designed specifically for the digital realm, offering easy and convenient banking along with unique and engaging ways to manage money.
Tide is a mobile banking platform for small businesses. Business owners can open an account within three minutes on their app. The app features segregated deposits, permissions for staff, and two-factor authentication. Funds are being segregated at Barclays and regulated by an FCA e-money license (no FSCS). The company offers comprehensive insurance against fraud and hacking from Hiscox.
Monese is a digital banking service that lets users open a UK banking account on their mobile in minutes regardless of their citizenship. Monese is a UK-based startup that targets immigrants who experience daunting tasks in opening a UK bank account as a foreigner. The mobile banking service established by Estonian Norris Koppel lets users open a current account and get a Visa debit card in just three minutes with a snapshot of their passport and a selfie. Monese’s technology is based on the cloud and removes many of the barriers that legacy banking systems impose.
London-based Osper is a prepaid debit card and mobile banking service that empowers young people to manage their money responsibly. It offers a safe Mastercard prepaid debit card and a simple mobile banking app with separate logins for young people and parents. All money on Osper is safely managed by a regulated European bank.
Starling, founded by Anne Boden, the former Chief Operating Officer of Allied Irish Bank, is aiming to lure mobile-focused customers and provide a superior current account service to those offered by the incumbent high-street banks.
Secco is building a blockchain-based bank with a completely differentiated value proposition. Unlike multiple challenger banks that are focusing on UI and UX, Secco plans to completely change the banking service itself. Apart from being branchless, Secco plans to provide their services without even an app. They will operate as an 'underlying' service hidden in all the apps and social platforms used day-to-day. As of June 2016, they are looking at clearing regulatory approvals and apply for a banking license.
Monzo is a digital platform that provides smart banking services to make money easy for everyone by pricing it at a low cost. Users are given access to Mondo’s iPhone app and a MasterCard prepaid debit card. They can load money onto the card every month and spend it at shops, ATMs and online. The users also receive real-time feedback regarding their spending.
Tandem is a digital banking startup led by Azimo founder Ricky Knox and Capital One’s Matt Coope. In December 2015, Tandem was granted a license by the Bank of England. Tandem is a banking tech platform that provides consumers with digital banking services like current accounts, credit cards, loans and other features.