The UK challenger bank scene is alive and healthy in 2018, with new initiatives popping up across the country to bank the under-banked.
This week, challenger Tandem Bank announced it had completed its purchase of Harrods Bank.
Previously owned by the department store of the same name, the acquisition gives Tandem access to a banking licence, access to £80m in capital and over 10,000 new accounts.
Tandem isn’t disclosing how much it paid for the pleasure of acquiring Harrods Bank.
The startup’s chief executive, Ricky Knox, said in a statement:
“Building a good bank is incredibly important to us. And the acquisition of Harrods Bank means we can now confidently develop innovative services in line with our mission to make our customers’ lives richer.
“With our new banking licence, our banking app and our fast-growing range of services, 2018 is going to be a great year for Tandem.”
And with the introduction of the new PSD2 directive this weekend, it’s likely we’ll see more startups like Tandem growing up and up in the UK.
Out of all the new digital challenger banks in the UK, which is the biggest? We had a look at the main offerings in the market, with a focus on startups that had received banking licenses already.
UK challenger banks: ranked
Atom Bank is slightly different from the other challenger banks out there. Launched by Anthony Thompson, the former Metro Bank founder, it focuses only on savings accounts and mortgage offerings.
Last year, the bank revealed it has passed over £900m in deposits, less than two years after launching its savings product. This puts Atom as the top tier of UK challenger banks in terms of deposits.
In addition, it has over 17,000 customers and has managed to raise over £107m in funding.
The Black Eyed Peas rapper and The Voice coach Will.i.am took a multimillion pound stake in the business in 2017.
Tandem is speeding ahead in terms of funding. According to the company’s CrunchBase profile, it has raised over $145m in funding, putting it ahead of the likes of Monzo and Starling Bank.
With its Harrods Bank acquisition, Tandem now has over 21,000 customers. In addition, the startup has over £400m in deposits, as a result of the takeover.
One thing that is interesting about Tandem is that it was built by over 11,000 co-founders. Together, the founders helped develop the product range and the name of the business.
In true millennial fashion, like the customers it wants to target, Monzo is pretty open with how many customers it has and how much they’re spending. In 2017, the startup was granted a banking licence and has begun rolling out its current accounts.
Last year, the challenger gained 404,764 new users, which should bring its new customer base to over 500,000. Of these customers, over 200,000 have upgraded to the new current account.
So far, Monzo’s most recent deposits figure is £47m.
It’s also interesting to see the figures Monzo is dealing with. Over £125m was spent online, whilst Monzo customers sent over £43m to their friends.
According to its CrunchBase portfolio, Monzo has raised a total of £106m in funding so far.
4~ Starling Bank
Launched by Anne Boden, Starling Bank was one of the few challenger banks to go after a banking licence and current accounts straight away instead of relying on pre-paid cards. It doesn’t release figures about how many customers have, though Boden has hinted that they are in the “tens of thousands.”
Starling Bank has raised $70m in funding.
At the moment, there are no figures available for how many deposits Starling has taken. Boden told Verdict that these figures will be available when the company publishes its reports.
Which is the biggest challenger bank?
Going off deposit figures, Atom Bank is the clear winner with over £900m taken in deposits so far. In this list, Starling was N/A due to the fact it has not released these figures yet.
However, if you go solely off customer numbers then that puts Monzo in first place, with over 500,000.
It’s great to see the UK challenger banks breaking ground with such numbers, however, the startups are a long way from killing the big banks. Lloyds Bank, for instance, has over 30m customer accounts and its retail banking side holds over £200bn in retail savings deposits.
With the advent of open banking this weekend, the UK banking scene could be all set to change.
This piece has been amended to remove Tide as the startup does not have a full banking license yet.
Verdict deals analysis methodology
This analysis considers only announced and completed cross border deals from the GlobalData financial deals database and excludes all terminated and rumoured deals. Country and industry are defined according to the headquarters and dominant industry of the target firm. The term ‘acquisition’ refers to both completed deals and those in the bidding stage.
GlobalData tracks real-time data concerning all merger and acquisition, private equity/venture capital and asset transaction activity around the world from thousands of company websites and other reliable sources.
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