Challenger banks racing ahead of traditional rivals

Highlights

• According to a survey conducted by the UK-based consumer brand, Which? The digital challenger banks were rated higher for their customer service and mobile apps.
• Challenger banks have a digital-first approach and use software and new-age technology to streamline retail banking services for their customers.

The new-age challenger banks that provide retail banking services using digital distribution channels like smartphones and online portals have outperformed traditional banks in the customer satisfaction survey.

According to the latest survey conducted by the UK-based consumer brand company, Which? The digital challenger banks were rated higher for their customer service and mobile apps compared to traditional banks that provide in-person banking through physical branches.    

Challenger banks have a digital-first approach and use software and new-age technology to streamline retail banking services for their customers. The digital challenger banks made their advent after the global financial crisis, which occurred during 2007-2008. These companies have a transparent fees structure and prioritise an improved user experience through a 24/7 digital interface.

© 2022 Kalkine Media®

Given the growing popularity of new-age banking amongst users, challenger banks are rapidly gaining market share and giving tough competition to traditional retail banking. Let us look at some of the fastest-growing UK-based challenger banks:

Starling Bank

Starling Bank is a major digital challenger bank that operates in the United Kingdom. It received a banking licence from Financial Conduct Authority (FCA) in July 2016.

Starling secured a five-star rating for customer service and mobile app in Which? Survey, with an overall consumer rating of 85%.

As per the survey report, the company opened over 2.7 million accounts to date, and its deposit base has been growing consistently in the past few years. Also, Starling Bank has received the best British bank award for four consecutive years since 2018.

Monzo Bank Ltd 

The company provides online banking services in the UK. In the Which? Survey, the bank received a five-star rating for its services and mobile app.

Monzo was at a second place, behind Starling Bank in customer satisfaction level at 83%. The company has over four million customers as of March 2020.

First Direct

The company is part of the retail banking divisions of HSBC bank, which primarily operates in the United Kingdom. It offers digital banking solutions to its clients and has over 1.45 million accounts.

The company products are popular amongst consumers are also part of Which? recommended provider (WRP) list. The company’s overall customer satisfaction level was 82% in the Which? Survey.