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The Bank ‘Challengers’ who Want Your Savings

A new interest-rate war is on the horizon, with challenger banks testing the complacency of traditional high street names, reports David Byers in The Times.

When Charter offered 1.6 per cent interest on a one-year bond it was quickly overtaken by Atom Bank, an app-based institution that will pay 2 per cent for those willing to lock away cash for 12 months.

Atom is also looking for fame as well as deposits. Its new spokesman is reported to be William James Adams, aka, the Black Eyed Peas frontman, judge on The Voice and tech investor. is said to be getting a £4 million stake in Atom in exchange for public relations activity, publishing social media posts and sitting in on board meetings. He has 13.6 million Twitter followers. is said by The Times to be backing the app-based Atom Bank


Following newcomers such as Metro Bank, Charter, Virgin Money and RCI, the carmaker Ford is also said to be about to launch a bank. “It’s a revolution brought about by ‘FinTech’, or financial technologies, the disruption that is sweeping across the globe and dominating the tech world conversations on everything from ApplePay to new credit algorithms, and turning access to capital on its head, as millions of people who have never had access to banking, saving, and capital, can own a bank account that they carry in their hands via a ‘phone App,” explains Steve Bailey, director of independent regulatory consultancy


And FinTech is itself enabled by ‘RegTech’, the financial regulation technology that tackles the burdens of regulation and eases compliance requirements. While FinTech powers products and services that can be used for competitive advantage in many markets, RegTech provides the products and services that enable effective compliance in highly regulated markets. So RegTech is not primarily about competitive edge, although it certainly reduces expenditure and also assists the new product development process.

Atom’s two-year savings account pays 2.1 per cent (up from 1.65 per cent). Its three-year account offers 2.2 per cent and if you opt to save for five years you will get 2.4 per cent. The next best buys in the two-year savings account market are also from challenger banks — Charter offers 1.75 per cent while the Bank of London and the Middle East has 1.65 per cent.

Tom Adams, the head of research at, says now is a good time for savers to consider challengers. “Atom is providing particularly attractive rates because, as a newer provider with an unconventional app-based model, it has to go that bit farther to encourage people,” he says. Atom Bank already employs 250 people and provides digital mortgages, fixed savings accounts and business lending. The bank’s backers include BBVA, the Spanish bank, Woodford Investment Management, the group headed by Neil Woodford, and Toscafund, the investment management business. By the end of last year, Atom had more than £110 million in deposits.

The Times defines a challenger bank as ‘generally a smaller institution making use of the latest technology and offering deals to compete with Britain’s big four — HSBC, Lloyds, Barclays and RBS. Large challengers include TSB, Virgin Money and Handelsbanken, while smaller ones include Secure Trust Bank, Metro Bank and Close Brothers.’

Other challengers are also appealing to hard-pressed savers. RCI Bank, part of the French carmaker Renault’s global banking group, has gained 60,000 customers and £2.1 billion in deposits from British savers since its launch in 2015. Meanwhile, Metro Bank is on track to post its first annual profit this year, thanks to a surge in new customers. The bank, which launched in 2010, signed up a record 260,000 customers last year to take its total to 915,000 and it is opening about 1,000 new accounts a day. Vernon Hill, the founder, said the response of the British public had exceeded expectations.

But with different regulatory environments and processes, should ‘FinTech businesses’ be subject to the same regulations as the major banks, or are they operating so differently that imposing the same regulations will only cheat consumers of choice?

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