So firstly we should discuss what exactly is a challenger bank? In short, a challenge bank is typically a smaller, recently launched bank that aims to challenge the status quo of the long-established banking “Big-4” of Barclays, HSBC, Lloyds and the Royal Bank of Scotland. With the UK sitting at the forefront to the challenge bank movement, challenger banks are authorised by the Prudential Regulation Authority meaning they are also covered by the Financial Services Compensation Scheme.

It’s pretty obvious that high street banking isn’t what it used to be, since the start of the COVID-19 pandemic, over a third of high street bank branches have closed their doors, and global banking giant HSBC recently reported that 90% of customer contact is now conducted using smartphone and with services primarily delivered online. This has created the void for the challengers to fill. There are a wide range of types of challenger banks; from the likes of Virgin Money and Metro Bank who have high street presence, to those who focus of commercial lending such as Aldermore and One Savings Bank, through to the digital challenger banks of Atom Bank, Monzo and Starling Banks.
So what is the main difference between a challenger bank and high street banks/building societies?
For most people the main difference will be that challenger banks will offer higher rates of interest on savings accounts and in many cases improved levels of customer service. They tend to focus on what customers want and meeting their needs with innovative tech-based solutions, whereas traditional banks rightly or wrongly have a reputation for being more resistant to change and overly bureaucratic.
Challenger banks are looking to disrupt the market by offering new concepts in banking, changing how banking and payments works through the early adaption of FinTech technologies, offering new and innovative customer-driven solutions especially in the SME Business Banking environment. Conversely though, especially for new businesses, the more traditional high street banks offer a more solid technical infrastructure and longstanding expertise and advice, making them attractive especially in the Start-Up community.
Are challenger banks new?
Absolutely not, there are a number that have been long established and are household names, for example First Direct and TSB who both have been around long enough to be classed as mainstream banks. First Direct for example was the first bank to operate in the UK with no physical branches, paving the way for many more challenger banks to follow. TSB, albeit an offshoot of the Lloyds Banking Group, had its brand revived in 2013 nearly 2 decades after the name disappeared in 1996.
In the last 5 years there have been a number of challenger banks come to the market which are now well established and are eating into the market. Starling Bank for example, bought a fresh, new approach to providing banking service alongside some of the best deals and most attractive interest rates.
“In 2017, there was a shift in banking activity, with more than half of Europeans shifting to digital forms of banking.  Europe’s leading economies including the UK, Germany and France spearheaded the change” 
– FT Partners.
So what are the benefits to the consumer?
The healthy competition driven by challenger banks is improving the whole UK banking industry. As challenger banks offer better deals and develop innovative services, traditional banks retaliate by improving their prices and services to match. Prior to 2012, consumers had limited options for our personal and business banking choices, now one of the downside of the rise of the challenger banks is the level of choice you now have and making the right choice.
A career with a Challenger Bank
For both graduates and experienced finance professionals alike working for challenger banks can be very attractive. Research tells us that employees working in the challenger environment are delivering a greater sense of loyalty, primarily born from the belief that they can influence the future direction of the business. However, as our team know, attracting talent to a challenger bank can be an issue, especially with the large mainstream banks soaking up local talent, there is still a limited talent pool which we work hard every day to connect with.
A career with a challenger bank is not for everyone; the often flat management structure and blurred lines of responsibility can be especially challenging (no pun intended) for those who have experience within the more regimented corporate banking industry, especially from those in the Big 4.
If you are looking for your next career move or are looking for your next key hire across all Finance and Banking sectors, not just within the challenger bank area, then please contact any of our team on 0161 932 1722 or email us at