By Sam Allen
Challenger banks have had the spotlight in the fintech space for the past couple of years, and for good reason. Money travels more today than ever in history; whether it’s money being transferred, currency being exchanged or overseas spending. There were 72.8 million visits overseas by UK residents in 2017, an increase of 3% when compared with 2016. The solutions provided by traditional banks have become outdated and people are no longer willing to accept the high costs and hidden fees.
This is where challenger banks have entered the market with cost effective solutions to everyday banking. While high street banks are better at primary banking practices, such as savings, loans and mortgages, challenger banks have provided better solutions for secondary banking services, such as currency exchange, money transfer and budgeting.
However, challenger banks seem to be pursuing more than just those secondary services. With slogans like, ‘better than your bank account’ and ‘bank of the future’, challenger banks appear to ramping up to tackle high street banks on the aforementioned primary banking services. These young challenger banks can often be seen criticising the old banks for being greedy and lacking transparency. While challenger banks claim to be better alternatives to high street banks, they aren’t alternatives at all. Not yet.
Firstly, to use a challenger bank, you’ll need a traditional bank account in order to deposit money. Secondly, while banks have been providing our families with loans and mortgages to buy homes and build businesses for generations, challenger banks are yet to offer these services. Finally, it seems either brave or naive to assume that people will trust their savings with a mobile bank, which has been around for two years, as opposed to a traditional bank, which has a 200 year old branch outside on your street.
So, are challenger banks really alternatives to high street banks? No. Not yet at least. However with the narrative they are adopting, they seem intent on trying. Will this lead to a revolution in banking? Or will a new solution enter the market?
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