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Challenger banks in the UK - Statistics & Facts

Historically, the banking sector in the United Kingdom (UK) has been dominated by a small number of large banks. Prior to the 2008 financial crisis, setting up a bank in the UK was an extremely expensive and long-winded process. In fact, it was so difficult to do that when Metro Bank was issued a license in 2010, it was the first to do so in a hundred years. After the financial crisis it was seen as essential to open up the banking sector in the UK in order to create more diversity, as well as achieve a broader and more financially resilient market.

The term 'challenger bank' is used as a description of banks and financial services that were created after the global financial crisis and have made significant impact in 'challenging' incumbent large banks or have had a significant impact on the market. Since the financial crisis and opportunities for challenger banks opened up, the "Big Five" bank dominance on the UK market has declined.

Challenger banks can be split into a number of different business segments. The larger challengers tend to be full-service banks that were divestments from larger banks, for instance TSB from Lloyds Banking Group, or wind-downs such as Virgin Money. Other challenger banks also include specialized banks e.g. OneSavings Bank and Paragon Bank, as well as retailer banks, such as Tesco's and Sainsbury's.

Perhaps the most exciting and newest additions to the challenger bank market has been the introduction of app-based digital only banks. The United Kingdom, especially London, has been one of the epicenters of the fintech revolution. The most successful newcomer was the London-based Revolut, which has seen it's customer base continue to grow explosively. One of the keys to disruptor banks growth has been the willingness of investors to fund them. As of February 2020, the UK was home to three app-based challenger banks that had become venture capital backed unicorns.

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Challenger banks in the United Kingdom (UK)

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Retailer challengers

Digital challengers

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