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Farheen Rahman

💭THIS OR THAT?

HIGH STREET BANKS vs CHALLENGER BANKS

 

What Are The Differences?


High Street Banks

  • These are typically retail banks you might find on your high street

  • Provide individuals and small and medium-sized enterprises (SMEs) with routine banking services such as deposit accounts, overdraft and a bank card

  • Examples; Santander, Halifax, Lloyds, Barclays

Challenger Banks

  • These banks usually just offer their services virtually, there isn't a physical bank you can go to

  • They provide individuals and SMEs with routine banking services such as deposit accounts and sources of credit, with a strong emphasis on good user experiences, (making sure their apps are easy to use and intuitive)

  • Examples; Monzo, Revolut, Cashplus, Tide

But What's the Hype About Challenger Banks?


EASY TO USE: Opening a current account with a traditional high street bank can take ages, including going into a branch and filling out forms, whereas, challenger banks, take the hassle out of opening new accounts. In many cases, it takes just a few hours to open a new account.

LOW FEES: Challenger banks do not operate physical branches, thereby allowing customers the opportunity to earn greater rates on their savings while paying cheaper interest on their debt.

EDGE IN TECH: Challenger banks typically provide cutting-edge technologies within their offering. And the apps have extensive User Experience features that most traditional banks do not provide.

NICE OFFERINGS: Some challenger banks hunt for market insufficiencies, so they can cater to a certain clientele E.g. Customers can access the African financial markets through Zenith Bank, a Nigerian firm with a presence in the UK.

QUIRKY BENEFITS: Consumers who switched to a challenger bank experience many benefits. E.g. No fees when using their cards abroad


KEY TAKEAWAYS FOR YOU

1. You're still subject to a Credit Check

Challenger banks must still have a banking licence to operate and therefore they're required to carry out credit check(s) when you apply for a new account. This is something to note for those with poor credit history or CCJs.


2. Challenger banks may not have the same level of protection as traditional banks

All financial institutions in the UK must abide by the FCA rules and protect deposits up to £85K. Check your challenger bank is registered with the Financial Services Compensation Scheme.


3. Challenger banks are here to stay and will continue to challenge the traditional high street banks. The market share and competition for bank account customers will continue to diversify further as high street banks continue to sell up their physical branches.


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