Challenger banks are continuing to disrupt the competitive landscape in the financial services sector. They are small retail banks that have been set up with the intention of competing for business from large, long-established national banks.
In the United Kingdom, challenger banks like Monzo, Starling, Tandem, Atom and Revolut are really taking off.
The new wave of digital banks have been built using the latest technology. The U.S. has at least 40 digital-first challenger banks; there are double that number in the U.K.
Most challenger banks and neobanks are based in the U.K. for two reasons, according to KPMG.
First, Britain isn’t as saturated with big banks and their branches as the U.S., creating an opportunity for non-traditional financial institutions.
Second, the U.K. was an early adopter of digital banking, dating back to the dot-com era of the late 1990s and early 2000s.
In the U.S., who are the challenger banks — and what technology are they using?
In this market, it's no surprise to see that most of the challenger banks are backed by mainstream banks.
In 2018, Goldman Sachs (NYSE: GS) bought the personal finance app Clarity Money, a fintech company that lets users track their finances across all of their accounts.
Clarity Money's backers were Soros Capital and Citigroup Inc (NYSE: C)'s venture capital arm. You can open an account with Goldman Sach's Marcus platform by using Goldman Sachs savings accounts from the Clarity Money app.
German online bank N26 is now accepting customers in the U.S. and has launched a bank account with a debit card.
N26 said existing investors include Peter Thiel's Valar Ventures, Chinese tech giant Tencent Holding (OTC: TCEHY) and the Singaporean sovereign wealth fund GIC.
Telecom giant T-Mobile Us Inc (NASDAQ: TMUS)'s mobile app is backed by the Customers Bancorp Inc (NYSE: CUBI) division BankMobile and is a nationwide, no-fee, interest-earning, mobile-first checking account.
JPMorgan Chase & Co (NYSE: JPM) recently shut down its mobile banking app Finn, which was meant to lure millennials with zero fees. One year after the app's release, the bank alerted Finn customers that it would switch over their accounts to Chase Aug. 10.
JPMorgan shares were trading up 2.13% at $109.98 at the time of publication Tuesday. Goldman Sachs, shares were trading up 1.93% at $205.40. T-Mobile shares were trading up more than 1% at $77.73.
Goldman Sachs Reports Q2 Earnings Beat
Photo courtesy of N26.
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