Better Banking: How challenger banks support sustainable growth, opportunity, and resilience across Britain - and how Government and regulators can enable them to do more

Innovate Finance and Hogan Lovells release a new report showing how Britain’s digital-first challenger banks have pioneered the concept of Better Banking by supporting small businesses and households and creating jobs across the UK. It also explores how the UK Government and regulators can enable them to do even more by taking a ‘challenger first’ approach and addressing some specific regulatory issues. 

Summary:

What have challenger banks delivered for society and the UK economy? 

• • Drive customer experience to a new level: Challenger banks lead the market in offering better saving rates to customers and SMEs (passing on interest rate rises to savers), and consistently top retail and SME customer satisfaction surveys. 

• Provide a critical source of finance for SMEs: Challenger banks now provide 55% of all small business banking in the UK. 

• Increase competition and innovation in banking: Challenger banks’ innovative solutions have increased consumer choice while forcing incumbent banks to improve their services. They have also created new high-value jobs outside London and the South East, including in Blackpool, Durham, Cardiff and Manchester. 

How can the Government and regulators help challenger banks to do even more? 

• Think challenger bank first: Policy makers often make a bee-line to the Big Banks to help with wider economic and societal policies, overlooking the digital-first, purpose-led challenger banks that are better placed to help.

• Apply proportionate prudential regulation including MREL requirements,  the Basel rules and the bank levy.
• Introduce a challenger bank test for new regulations to avoid unintended consequences for challenger banks, digital business models and their customers.

Contributors and points of contact:

Innovate Finance

Janine Hirt | CEO 

Adam Jackson | Director of Policy 

Christopher Foo | Policy Associate 

Veronica Glab | Head of Partnerships 

Hogan Lovells

Rachel Kent | Partner

Charles Elliott | Counsel

Richard Barfield | Adviser

Read the report here