What is a challenger bank or mobile bank?
The new wave of startup companies on the banking scene can't be found on the high-street – they're in your pocket.
Buoyed by relaxed regulation and the growing shift of people using their phones to do their banking business, branchless, mobile-only banks are seeking to win customers from their more established rivals.
The term challenger bank is used to describe any bank that’s looking to challenge the big four in Britain – Barclays, Lloyds Banking Group (which includes Halifax, Lloyds Bank and Bank of Scotland), HSBC and RBS (which includes NatWest and Ulster Bank).
Established players, such as TSB, Virgin Money and Metro Bank, fall into this bracket, but for the purposes of this guide we’ll be looking to shine a light on the upstarts that offer mobile-only, branchless banking.
Challenger banks and mobile banks: the benefits
The new banks we've analysed focus on modern design, personalisation, low fees and snappy customer service to tempt people in.
They also feature real-time payment notifications, meaning you receive an alert every time there is some activity on your account. This not only make it easier to keep track of your spending, but you can also immediately spot if someone's using your account fraudulently.
Most shy away from offering significant interest on current account balances or up-front switch incentives to make the likes of Tesco Bank or Santander sweat.
Their future will lie in your willingness to share your spending data with businesses that have partnered with these new banks, receiving deals based on your spending patterns and behaviour.
Starling Bank review
Starling Bank received a banking licence in July 2016, and launched the UK's first app-only current account in March 2017. Over 100,000 customers have signed up so far.
The London-based firm has built its IT systems from the ground up, raising £48m to-date.
It says that it has a strong focus on data and transparency and aims to woo people who are used to seeing their life in a dataset, similar to users of health-tracking watches Fitbit and Apple Watch.
Monzo Bank review
East London-based Monzo Bank got the word out through hackathons and asking tech ‘influencers’ to share its app via word of mouth and Twitter.
It says more than 500,000 people are registered for its current account and using its 'hot coral' debit cards.
Atom Bank review
The Durham-based online bank is co-founded by the former chairman of Metro Bank and the former CEO of First Direct.
For now, it only offers fixed-rate savings accounts and a digital mortgage broker service.
It's raised almost £400m from investors, backed by Spanish Bank BBVA (with a 39% stake), Woodford Investment Management and Toscafund.
Set up by a Credit Suisse equity analyst and a former Deutsche bank app developer in July 2015, Revolut is aiming to shake up the travel exchange market.
Revolut claims its rates save customers 3% to 5% because it uses the 'Spot Interbank' exchange rate, the wholesale exchange rate. The firm is thought to be worth £300m and claims over 500,000 UK users (over a million across Europe).
Not to be confused with the popular classified magazine of the 90's, Loot was set up by 22-year-old Ollie Purdoe and was originally geared towards students who wanted to know how long their loan would last them.
It reportedly has over 50,000 users.
Dubbed 'banking for migrants,' Monese was founded by Nunis Keppel after he realised he couldn’t get a bank account as an Estonian immigrant. The bank is on a mission to remove as many hurdles as possible from setting up a bank account in the UK.
Available for 8-18 year olds, Nimbl allows parents to track their child’s spending, while incentivising small savings each month, all in the name of a healthy financial future.