Challenger banks pay their way

We’re all accustomed to thinking of banks as huge profit makers, but the truth is that Britain’s ‘challenger’ banks, such as Monzo, Revolut, Starling and Atom, are far from in the money.


These new banks, which offer a wide variety of features such as the ability to freeze and unfreeze your banking card via an app, are widely touted as the future of banking, but Revolut only broke even on a month-by-month basis back in February, while others are still to turn a profit.

Whizzy features are expensive, and it turns out that many of the banks are struggling to gain customers who use them for their main bank account.

New Consumer Intelligence figures show that many customers are still wedded to the high street stalwarts for their main banking, ranking branch access and established names as important reasons to stick with a bank.

“For the fintechs to make money, they need to convince consumers that they are a safe and viable alternative to banking with the old names,” says Andy Buller, banking expert at Consumer Intelligence. “Our most recent study suggests they’ve a way to go before they achieve this, but there are changes they can make to speed up the process.

“Customers value online access and apps, but our study shows they aren’t quite ready to let go of the big banks. More reassurance is needed from the Fintech challengers that they are really a safe alternative.”


We asked a representative sample 2000 people across the UK to rank different aspects of banking by importance, from 1 (most important) to 6 (least important). The results revealed that the ability to bank online is very important to customers but since most high street banks offer that as well there are other features that customers rank as vital.

Over a third, 36%, said that online banking was the most important thing. However, this was backed up by a significant number of people who want some more ‘traditional’ aspects of banking to remain. Almost a fifth (18%) said that branch access was the most important issue for them, while a further 14% put this as their number two reason for choosing a bank.

We also asked whether having ‘an established name’ was an important feature when it comes to banking choice.


Almost a fifth (18%) said this was the most important thing, while a further 13% put it second.

While customers want physical access in a branch, the study shows that providing telephone support is no longer seen as desirable. Only 2% of respondents said that telephone banking was the most important reason to choose a bank, while 6% put it second. 41% of people said that telephone banking was the least important of the six options to them.

What else do people find important? Our research shows that it isn’t the product range that is pulling in consumers. Just 6% said the range of banking products was important, while 14% ranked this second. Good rates, however, were ranked as the top consideration by 25% of those looking for a bank, while 24% put this second.

Most important reasons to choose a bank


Online presence

Good rates

Branch access

Established name

Range of products

Telephone banking








Online is where it is at — but customers want back up

“Customers need to bank online, and rightly put this first,” says Andy Buller, from Consumer Intelligence. “But our studies show they still want branch access. Possibly due to recent issues with technology, having an established name is also still seen as comforting. Challenger banks who want to be the ‘main choice’ for customers may want to look at ways to offer a high street presence, for example an association with The Post Office, to win over customers.”

The challenger banks are still small

The CI research shows that, although challenger banks are making a big noise in the market, their influence in terms of numbers is a ripple rather than a wave. Virgin Bank had the largest number of customers who had an account with them, at 12%, with Metro at 4%. It is worth noting that these are the only banks in the list that have a branch network.

Revolut had the next largest presence, at just 3%, and Atom, Starling, Monzo and Aldermore had 2%, with Tandem on 1%.

And the number of people using them as main accounts is even smaller

Asking those customers who use the banks whether they have them as their main account illustrates the hurdle these banks need to clear. Even Metro and Virgin are struggling to convert their customers into main current account holders, which is vital for those businesses striving for profitability.

Percentage of customers who are using their challenger account as their main account


















“The figures show that most of us who have a challenger bank account are still running it alongside another account,” says Andy Buller. “Even established brands such as Virgin and Metro don’t clear the 50% mark here. It will take more work, and time, to persuade people to ditch the big banks and go challenger bank”

What would persuade customers to switch to fintech or challenger?

We asked customers what would persuade them to use another bank, specifically a less well-known one such as a challenger bank. Only a small number — 6%  believed that ‘apps and features’ were the most important thing for switching purposes, with many more citing good rates or online access (something that all the high street banks offer as well as Fintech-based challengers”.

Most important factor that would persuade you to switch to a lesser-known bank


Apps and Features

Online Access

Telephone Access

Time in the Market

Branch Access

Good range of products

Good rates









“Offering good rates is really important to consumers, with 41% indicating this would persuade them to switch, and challenger banks need to bear this in mind, especially if they are investing heavily in apps and features that our survey show that customers are not especially valuing at present,” says Andy Buller. “Meanwhile 14% of people are naturally conservative- gaining their trust, and their custom, will take time.”

What features are worth investing in?

While challenger banks promote their app-based features, customers are using some far more than others.

Features used Very Regularly and Regularly by respondents 


  Very regularly Regularly
Paying with your phone rather than a plastic card 6% 9%
Analysis of your spending on a banking app 14% 14%
Banking on your phone 33% 17%
Budgeting help from a banking app 5% 8%
Free ATM withdrawals overseas 6% 11%
Sending money with your mobile 12% 16%
Free ATM withdrawals overseas 6% 12%
Freezing and unfreezing a card 1% 4%


“While Fintech banks are proud of their apps and features, consumer studies show that few of them are being used to their full capacity yet. Features related to personal banking, such as budgeting help and spending analysis are still not being regularly used by most consumers, suggesting that more customer education is needed, its also important to remember that managing your finances might not be best managed by a bank but via and open banking service’ says Andy Buller.



What can challenger banks do?


Understanding what customers want, what they are using and what might make them switch will give them the ability to target their offering at their customers.


 Learn more



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