The head of fintech research and analysis at PwC, Aaron Schwartz, shares thoughts on the challenges facing challenger banks hoping to acquire new customers. He is one of several industry leaders who contributed to the 82-page Digital Banking Report, “The Challenger Bank Battlefield”
The true measuring stick of a new market trend often appears when customers have a number of credible commercial options to choose from. This very well may be the case for ‘challenger banks’ in 2017 as several companies, including Monzo Bank, Starling Bank and Tandem Bank, are expected to launch with new services that span essentially all core areas of retail banking. This emerging class of challenger banks, which largely took root in the UK, will join the likes of Atom Bank and N26, which currently offer products including savings and a consumer credit product, respectively.
This new category of alternative competition in banking only appears ready to expand further. In the UK, regulators are assessing authorization from an additional 20 to 30 firms, with even more preparing to apply for a license. Given the concentrated market share in the UK, where the top five banks hold an 87% share relative to 44% in the US, the Bank of England along with UK regulators have taken steps to reduce the burden for challenger banks to seek banking licenses in an effort to increase the number of UK banking options. In the US, the Office of the Comptroller of the Currency (OCC) also has issued recent guidance for the issuance of national bank charters to fintech companies.
