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Challenger banks have changed the banking industry; they’ve brought features to market that are invaluable to bookkeeping and money management.
What is a challenger bank?
2008 saw the banking crash and this created a need for a rethink in the banking world. The UK changed their policies to make it easier for new banks to apply for banking licenses. They hoped by doing this, it would widen the banking market and reduce the chance of another crash.
The nation had lost its faith in the traditional big four (Barclays, HSBC, Lloyds Banking Group, Natwest Group) and were looking for new places to manage their money.
These changes gave rise to a number of new “challenger” banks that were ahead of the curve. Challenger banks tend to be smaller, digital first, and rarely have branches. This means fewer costs and often better deals for their customers.
How challenger banks have influenced the big four
The traditional banks were just that – “traditional”. They had their ways of doing things, and although they were making digital advancements, it was usually slow paced and often on their terms.
When challenger banks came along for their share of the market, the older banks realised that they needed to make changes in order to keep customers.
Online banking and open banking have made such a difference to every day life; to businesses and to the accounting world.
Incredibly useful banking functions you need to read about
Team Members
With certain banks, if you’re a sole trader or a limited company, you can assign team members to your bank account. You can award them different levels of access too.
Virtual cards
There are a number of banks that offer virtual cards. Getting a physical card takes time. Virtual cards can be quick to order, can be given out to multiple people and are easy to cancel. This is particularly useful to protect your security for one off purchases. For instance, you buy a new flat screen TV with your virtual card, and then cancel the card afterwards, ensuring no-one can fraudulently use your card.
Savings Pots/Spaces
Saving for a holiday? Saving for your VAT bill? Saving for a house? Some apps now include “savings pots”. You can easily organise your money by moving it into these different pots. For instance you could name one “New car” and manually move money into it every month or set up a standing order, or switch on “round ups”. Round ups, round up to the nearest pound every time you spend. For example, if you spend £3.95, 5pence is added to your “space”. You can choose a multiplier too for example, x 10. This will add 50pence to your space.
All your accounts in one place
Are you fed up of having to have an app for every single bank account? Certain banks use the open banking API to allow you to list them all in one app. It can include credit cards too. No hopping between apps!
Challenger banks don’t worry about weekends: Traditionally, banking halts at weekends and bank holidays. With challenger banks, they’re just another day. For example, if you set up a standing order for every Monday and there is a bank holiday Monday, a traditional bank won’t process it until the Tuesday, but the challenger bank will process it on the Monday, regardless.
Please note: The features above may not be available within all banks and some of these features involve extra charges.
How do I choose the best bank account for me?
Firstly, start with what’s important to you in a bank account. Make a list of things you need from an account. Then, a list of things that would be nice to have. This will give you a basis.
Next, do your research; there are plenty of online sources comparing bank accounts. Make a note of your favourites as you go and save any tabs you might want to refer back to. You can whittle the list down from your notes. If you like more than one account, why not take out multiple? You can try them out and you can always get rid of any you don’t find useful.
Please note: This article is not intended to help you choose a bank, but to inform you of what’s available. We advise you to perform your own research before switching bank accounts. Please note that we are not financial advisors.
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