A growing focus on consumer experience and digital services in retail banking has led venture capital investors to put over $250M in deals to “neobanks” and increasingly, digital-only challenger banks.
While neobanks such as Moven and Number26 offer a mobile-first banking experience in partnership with a traditional bank, so-called challenger banks have applied to become fully licensed banks, creating new data-driven banking experiences and pricing models from the bottom-up. The rise of these upstarts has been a notable development in the UK, where regulators including the Financial Conduct Authority and the Prudential Regulation Authority have approved multiple startups for bank licenses.
As the chart below highlights, investors are increasingly keen to fund UK-based digital challenger banks amid a wider boom for digital banking. Notably, Atom Bank took a $128M minority investment from BBVA in November, but other active and funded digital challenger banks operating in the UK also include Tandem Bank, Mondo, and Fidor Bank.
Here’s a roundup of who’s who among investor-backed digital challenger banks thus far within the UK.
| Digital Challenger Bank | Description | Funding |
|---|---|---|
| Atom Bank | Atom Bank aims to offer mobile personal banking and savings as well as business banking, loans, and mortgages. Atom was founded by former Metro Bank co-founder Anthony Thomson. Atom received a full license from the Bank of England in June 2015. | $167.2M. BBVA recently took a 29.5% stake in Atom at a $226M valuation. Other investors include Anthemis Group, Woodford Investment Management, Polar Capital Group, and Marathon Asset Management |
| Fidor Bank | German digital-only bank Fidor launched in the UK in September having applied for a UK banking license in January. Fidor was one of the first banks to use the Ripple internet-based payment protocol. | $5M from Xange Private Equity & Anthemis Group |
| Mondo | Founded by former Starling team members, Mondo applied for a bank license earlier this year for its smartphone-based bank. | $3.1M from Passion Capital |
| Starling Bank | Starling is hoping to secure a banking license in early 2016 for its mobile-only banking platform. Starling CEO Anne Boden was previously COO of Allied Irish. | In August, Starling was reported to be raising $15.7M for its 2016 launch, having previously raised from undisclosed angels. |
| Tandem Bank | Tandem became the second UK digital challenger bank to earn a license in December and plans to offer digital services including current accounts, credit cards, and loans via its mobile app and website. | Tandem counts Route 66 Ventures among its initial investors |
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