As challenger banks continue to mature, gain market share, and power increasingly larger portions of the SME community, the lines between traditional and new players have become blurred. The question ‘How will the challengers continue to challenge?’ was answered by industry experts today at IFGS 2025.
In the panel session ‘What’s next for challenger banks?’ speakers Emma Hagan, CEO at ClearBank UK; David Jarvis, CEO at Griffin; Alex Mollart, CEO at Tandem Bank; Mark Mullen, CEO at Atom Bank; and Eimear O'Brien, partner and co-head of global fintech practice at Hogan Lovells discussed the evolution and future of challenger banks.
Moderating the panel, O'Brien kicked things off by asking what sets challenger banks apart from traditional banking. Hagan explained the emergence of challenger banks post-financial crisis, aiming to provide better financial services for consumers and SMEs, filling the void left by traditional banks.
Hagan stated: “Challenger banks came around delivering something different, a digital-first, tech-driven financial services platform that was customer-centric, focused on enhancing the user experience for their consumers and put innovation back into financial services.”
Pointing to the current decline in market share of big banks and the rise of challenger banks, Mullen mentioned how despite their valuations and returns increasing, big banks' are not growing when it comes to new customers or market share flow.
“It gives me hope and confidence for the future, because all it's telling us is it takes quite a long time for this sector to change, but if you stick with it, you can make it happen, because the data doesn't lie. These banks are living in the past and living from past revenues.” commented Mullen.
O'Brien directed the conversation to the challenges facing the challenger bank sector. Jarvis discussed the potential negative impact of diverging regulatory frameworks on challenger banks, explaining “you end up with banks that enter the market and have some initial success, and then quickly find themselves tripping into regulatory frameworks that are built for Goliaths. This means while it's comparatively easy to build a challenger and get it to market, once you start succeeding, you get strangled a little bit.”
The conversation turned to the key sector trends, with Mollart emphasising how challenger banks are now focusing on scaling up and developing new products and services to retain and grow their customer base. “We’re winning in our whole market, and we're now starting to develop more products, more services to try and resell, to cross sell, and turn customers from being transactional into much more of a relationship,” said Mollart.
When asked about future growth opportunities for challenger banks, Hagan commented on partnering with regulators, policy makers, and government to shape the future of regulation to combat the challenge of scaling effectively while navigating regulatory demands. Hagan furthered that embracing innovation through cloud-based technology, APIs, and AI is crucial for staying relevant. Jarvis added the need for global regulatory cooperation to enable challenger banks to compete globally. The potential negative impact of diverging regulatory frameworks on challenger banks' expansion plans was further highlighted.
Commenting on the importance of customer trust, Mollart mentioned challenger banks can win trust by offering modern, reliable services without legacy systems. Mullen added how innovative approaches to avoid legacy systems, including the importance of building brand familiarity and reputation through experience and price, can help challenger banks differentiate themselves by offering better, faster, and cheaper services. The focus should be on building a reputation for reliability and value over time.
Wrapping up with a key takeaway on the future of the UK challenger bank sector, Hagan emphasised the importance of a ruthless focus on scaling, while maintaining a core focus on customer experience and innovation. Mollart and Jarvis agreed, highlighting the need for a clear vision and strategy.
Concluding the panel, Mullen quoted Churchill's famous line, "Never, never, never give up," to encourage persistence in the face of challenges.