Will Traditional Banks Take on Their Challengers?

 

The number of the new banks seeking to disrupt the UK financial services landscape has increased in the last couple of years. These so-called ‘challenger banks’ are luring customers away from the traditional banks at an alarming pace, growing their customer base from those who are still suspicious of traditional institutions since the financial crisis of 2008.

 

The UK’s high street giants seem unable to stem the exodus. Despite updating their systems and business models to become more relevant to their customers and keep pace with fintech (global fintech adoption has risen on average from 16 percent in 2015 to 33 per cent in 2017) they have been unable to develop agility and increase growth.

 

In a McKinsey & Company report, published last year, the firm concluded that if banks tried to take a back seat till the fintech wave passed, they will probably end up struggling to survive. The era will belong to proactive instead of reactive banks. To circumnavigate this outcome some banks are showing a strong appetite for collaboration. According to PWC almost 50 per cent of financial services firms around the world plan to acquire fintech start-ups in the next three to five years.

 

The main UK challenger banks to emerged are Starling Bank, (founded in 2014) Monzo, (2015) Atom Bank, (2014) Revolut, (2015) Pockit (2014) and Tandem (2013). Revolut is the largest and in just two years, is on target to reach more than 1 million customers by the end of 2017. It claims to be one of the fastest-growing fintech startups in the world and has its eye on expansion into North America, Asia, and Australasia.

 

However, a recent report by Accenture has questioned the purpose of banks relevance entirely and highlights how digital disruption is shrinking the role and relevance of banks in the global economy.

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