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The UK’s Digital Banking Horizon

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Continuing last week’s traction of banking modernization, this article will inform you about the UK’s history and landscape of natively-digital challenger banks. You’ve probably heard of Starling Bank in passing but you most likely have not deeply reflected on why it is such an impressive prospect, particularly in the UK banking environment.


How Did We Get Here?

When you think of the UK banking scene, if you ever do, your mind is probably filled with potential options and alternatives. As true as this may be today, this is a situation that has only developed in recent years. For over a hundred years obtaining a banking license in the UK was a logistic and legal labyrinth that very few even dared to enter [1]. The financial chain-reaction triggered in 2008, the 2012 Financial Services Act and the creation of the New Bank Start-up Unit (NBSU) within the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) created a framework that greatly facilitated the potential entrance of new players into this realm [2].

Among other things, this triggered the foundation of disruptive challenger banks which, as their name might imply, essentially consist of digitally-driven and licensed retail banks with the precise goal of rivaling the UK’s status quo of banking [3]. Today, over 20 of these organizations are on the official radar and some amass close to 10% of the UK’s total population [5]. Names like Atom Bank, Monzo, Virgin Money and Starling Bank are no longer only for the tech-savvy and anti-establishment but rather for those potentially fed up with the endless customer-service visits to their local branch or those actually interested in the ease with which they can sort out their personal finances on their smartphone [1].

Who is Fighting for Survival?

Nonetheless, the exponential growth of challenger banks is both praised and questioned by a range of experts in the field. While some point to the more than ‘1,700 physical branches closed in the last five years’ by the most prominent banks in the UK as a sign of the collapse of non-digital methods others doubt that the corporate financial models of purely digital banks can fight even the mild digitally-inclined shift of historically-dominant powerhouses [4].

What is surely becoming increasingly clear to all those involved is that customers’ demand for a digital modernization of the banking sphere can no longer be ignored.

Written by Iñigo Sancho, Chief Research Officer at KJC



[1] Financial Times

[2] Bank of England

[3] Deloitte

[4] Department for International Trade

[5] Statista


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