Challenger banks tend to have all the energy of an excited puppy: young, agile, full of bounce. And it is bringing in results. Recent news from British challenger bank Starling is a partnership with API specialist TrueLayer. The collaboration shows us once again how open banking principles are being embraced wholeheartedly by the new kids on the block.
Why? Because collaboration between fintech challengers helps them get ahead in a market dominated still by incumbents. Recent fintech news has seen many developments from the little guys in banking. Taking in activity in Britain, Europe and even more further afield, here is a closer look at the trends to stay on top of.
Starling Bank is an app only bank. On Feb 13 they announced partnerships with four fintechs. This fifth collaboration demonstrates a noteworthy momentum of change in both the challenger and the fintech industry.
The integration of TrueLayer with Starling will enable businesses to access customer account data. TrueLayer is a fintech developer platform. Their API expertise allows firms to more easily access the bank data they need to build new financial apps and services. Open banking principles at their finest.
This news from Starling reaffirms last months analysis of the UK challenger bank ecosystem: it is in tip top shape. Challenger banks in Britain while still statistically small, are changing the industry from an ideas perspective faster than ever.
Another creative British challenger is Tandem.
Tandem’s creative business structure collected over 10,000 people as the company’s “co-founders”, who joined on an invite-only basis. These people contributed ideas and tested features for the company, receiving one share in the business in return. The digital bank acquired Harrods Bank in late 2017. In February 2018, Tandem launched a credit card that offers cashback and no fees when spending abroad.
Challengers in Europe
N26 is a sure mention. They boast to be the first virtual bank with a full European banking license. Bank accounts are managed through smartphones and all services integrated into the mobile app. The German mobile bank now has over 500,000 customers from 17 countries in Europe and a collected capital of more than US$55 million.
Revolut in February was the first app-only bank to break even for an entire trading month. The UK rival of banks like Starling has a swelling user base and new products to boost its revenues.
Who are the global innovators making headlines?
Riyad Bank has announced it will issue contactless bracelets linked to debit of credit accounts. Not a challenger, Riyad Bank is one of the largest financial institutions in Saudi Arabia and the Middle East. This entry into the wearables market signals a desire to innovate and push barriers in retail banking. There is also a sticker for mobile phones, or any other device. Other banks interested in wearables include National Bank of Greece, ABN Amro and Barclaycard in Europe and Westpac and Bank West in Australia. It seems wearables is more of a ‘big guy’ trend.
Is it always the little guys? What about the behemoths?
There has recently been a lot of speculation that Amazon will move into banking. If the online giant does make this move, predictions say that it could be among the top three retail banks in the US. Amazon has been seen to be talking to banks like JP Morgan Chase. The big tech firms – Amazon, Google, Facebook – have the potential to swiftly move into the banking sector because they already combine processing power and security know-how. This means they could quickly gain the capacity to safely store and process financial data and transactions of millions of people. A major draw card is their knowledge of consumer behaviour and user-friendly design.
By Grace Appleford, Research Analyst.