Challenger banks are chasing down incumbents

By Daniel Lanyon on 4th July 2017

Alternative Credit

Disruptive names as Metro Bank have shot up world rankings amidst difficult UK banking market.

Challenger banks are chasing down incumbents

Disruptive names as Metro Bank have shot up world rankings amidst a difficult UK banking market. 

UK challenger banks are shooting up the banking league tables, according to the latest ranking of the world’s largest banks, which demonstrate fintech firms are able to grow despite a difficult market backdrop.

The UK’s big players in the banking world such as Barclays and HSBC fell down in The Banker’s annual world rankings, but challenger banks saw dramatic improvement, moving up 187 places in the case of pack leader Metro Bank. Aldermore, Shawbrook and OneSavings also entered the global top 1,000 for the first time.

Challengers, looking to grab market share from traditionla incumbents and capitalise on fast-moving changes in the global financial services industry, have seen strong growth in recent months with more and more services coming to market.

Banks’ fears that standalone fintech firms threaten revenue are increasing. An industry survey by PwC recently found 88 per cent believe income is at risk, compared to 83 per cent last year.

Firms such as Metro Bank, Starling and Monzo claim they are less encumbered by legacy IT systems and offer product more suited to the digital savvy.  While this has been an apparent threat for the giants of the market, partnerships are on the up.

A large majority of global banks intend to increase their partnerships with fintech companies over the next 3-5 years. Upcoming PSD2 regulation will in fact require established banks to move into this more open environment, sharing customer data via open APIs.

Ben Boswell, UK & Ireland Director at technology integrator World Wide Technology, warns this could raise issues around data storage and security, creating a ‘barrier to innovation.’

 “This latest ranking indicates that the newer, so-called challenger players are finding it easier to adapt to the regulatory environment and consumer demands. We’ve already seen a surge in the number of financial services firms taking on board technology innovations as they seek to take full advantage of digital possibilities. But the data challenges which collaboration and the open banking environment creates – particularly around security – are significant, and hit the largest players hardest,” he said.

Comments

AltFi London Summit 2019

The UK's oldest and best-loved conference for fintech and alternative finance insiders returns for its sixth iteration at etc.venues. We'll showcase the best of the UK's digital banking, online lending and digital wealth sectors through a series of uniquely in-depth discussions and presentations. Open Banking will be in full flight, just over a year on from its launch, and will be a central theme at the event.

18th March 2019


Companies in this Article:

Metro Bank
Monzo
PwC

More like this:

P2P fund eyes dividend growth

30th November 2018
Daniel Lanyon

Private debt market grows to record size

7th February 2018
Daniel Lanyon

European private debt market hits $200bn in assets

28th November 2018
Daniel Lanyon