When Apple launched Apple Pay in 2014, Apple fans celebrated with the tech giant but it’s not just Apple Pay and its competitors Samsung Pay, Google Pay, and other online payment brands that are transforming banking and finance, challenger banks the likes of Monzo, Revolut, Tandem, Atom, N6, and Starling are shaking up the industry as well. German financial technology (fintech) company N26 had 300,000 users in 17 European countries based on 2017 data while the UK’s app-based bank Starling made headlines in the same year. Their numbers are growing too as fintech startups can now be found on six continents.
How challenger banks are tipping the scale
According to international money transfer brand Azimo, Europeans who use mobile banking can save up to 7 billion GBP per year. Because of the savings, tech-savvy consumers are gradually transitioning to app-based banking. It’s not just about the savings though, it’s also about convenience. Fintech companies are shaping the finance sector “from the outside in,” according to a Global Fintech Report in March 2016. Apart from being able to do all banking transactions on mobile, the growth of challenger banks is largely due to cheaper fees and faster transactions and all consumers need to do is to input their credit card or bank account details in the app and they’d already be able to send money at home and abroad. Based on the sudden growth of fintechs and their increasing mass appeal, they will likely become mainstream in the coming decades. According to the PwC, fintech companies know their customers well and this is their biggest weapon in disrupting traditional payment methods and consumer banking.
Fintech startups in the Middle East, Asia, Oceana, and Africa
It’s not just Europe that is experiencing the steady growth of fintech companies. There is also an uptake of app-only banking in the Middle East. In 2017, the United Arab Emirates’ oldest bank launched Mashreq Neo to get a slice of the digitally active market. China’s Alipay, on the other hand, just partnered with the Philippines’ GCash a few months ago to provide a faster, more convenient, and cost-effective way of sending money from Hong Kong to its Southeast Asian neighbour. Australians have already embraced fintech for years as well. Advocacy group FinTech Australia says that it exists so it can help the country “become one of the world’s top markets for fintech innovation and investment.” Africa’s fintech startups the likes of Rwanda’s PesaChoice, Nigeria’s PiggyBank, Kenya’s Olivine Technology, among others are also making waves in the region’s finance sector.
Fintech startups in North America and South America
Fintech apps such as Venmo and Robinhood are working their way to take over the North American market, according to Fortune magazine. South American fintechs are also revolutionising cross-border payments and banking, an answer to the growing global marketplace’s need to send and receive money to and from different parts of the world. Some of the most notable startups in Latin America include Aflore of Colombia, an app that provides loans to the unbanked and challenger bank app Recarga Pay from Argentina. Based on 2018 reports, challenger banks are now better positioned in the finance market than established institutions and brick-and-mortar banks may need to partner with them or risk getting left behind.
It is still too early to tell as to when challenger banks and their apps will become mainstream but due to their rapid development and their knowledge about the market, it is likely that they are here to stay.