Challenger Banks
Challenger banks are the vibrant group of businesses shaking up the banking market. Some offer a full banking service, whilst others provide a niche offering around a particular product or service. Many use the latest technology and as they have no legacy issues, they can be more flexible and offer an enhanced customer service.
Why Challenger Banks?
Following the 2008 financial crisis the financial landscape opened up from domination of the big 4 banks creating opportunities for challenger banks to enter the market.
The majority of challenger banks operate online which allows them to use the latest technologies to innovate with newer and more flexible solutions for the SME market, forcing the established banks to adapt to keep up with the newer entrants.
They will typically focus on specific market segments or niches and may offer specialised products and services tailored to those groups.
Many challenger banks focus on the fastest onboarding process possible, making it easier and more efficient for customers.
FAQs
Are challenger banks safe?
For challenger banks with banking licences, customer deposits are protected by the FSCS (Financial Services Compensation Scheme), up to a value of £85k. In the UK, banking licences are authorised by the Prudential Regulation Authority (PRA), with consent from the FCA, and certify that a bank has met strict legal criteria required to ensure their customers’ funds and data are kept secure.
Some companies market themselves as challenger banks, but are actually payment or e-money institutions. Those companies with an e-money licence are still regulated by the Financial Conduct Authority (FCA).
There have been concerns about the robustness of some challenger bank risk policies and procedures with the FCA responding with a 3 year startegy to improve outcomes, to prevent serious harm, set higher standards and promote competition in the UK financial markets.
What are the key benefits for a business using a challenger bank?
Challenger banks offer more flexibility compared to traditional banks. They also tend to have more modern digital platforms that make banking more convenient.
Do challenger banks offer additional services - i.e. international payments?
Many challenger banks offer international money transfer services, but it is best to check with the bank to find out exactly what options are available and any fees that might be associated with them.
There are a limited number of challenger banks offering overdraft and lending facilities.
Next Steps
As the UK’s only truly independent commercial finance brokerage acting purely in the clients best interests (we do not take commissions / fees from funders) we have unparelled access to the challenger bank market.
Therefore it’s a good idea to seek independent, specialist financial advice before deciding on the right type of finance to apply for.
For an initial no obligation call or meeting, please contact us to arrange.