Challenger banks outperform the ‘big five’

Challenger banks outperform the 'big five'




Tailored services and personalised online banking are key for modern challenger banks says Masthaven, after it was revealed that the challengers outperformed the 'big five' in 2015.

Figures released by Dutch financial services group KPMG showed that challenger banks increased pre-tax profits of £194m last year, whilst the big five recorded a drop of £5.6bn.

Jon Hall, Managing Director of newly-authorised Masthaven Bank said: “Personalisation and digital experience are, we believe, key cornerstones of a modern challenger bank – but they need to be centred around the customer, as enablers to help them better manage their money.

“Only then do they start to disrupt a marketplace and redefine banking as we know it.”

The report identified the big five as Barclays, HSBC, Lloyds Bank, The Royal Bank of Scotland and the UK subsidiary of Santander, whilst the smaller challenger banks included the likes of Metro Bank, Aldermore, Charter Savings and Shawbrook.

It revealed that lending assets for challenger banks grew by 31.5%, whilst the big five saw a 4.9% decrease.

Meanwhile, smaller challenger banks delivered a 17% return on equity (ROE), compared to only a 4.6% ROE from the top five banks.

KPMG attributed this growth to digital efficiency, noting that the big five were hindered by unwieldly legacy IT systems.

Jon added: “As the first challenger bank to receive authorisation in 2016, we are focused on building products that customers can tailor to suit their lifestyles – for too long banks have dictated the terms - true personalisation will enable the customer to control the terms.”

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