How challenger banks are outperforming the high street’s biggest names

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There’s much excitement in the challenger banking space in the UK, that sometimes it’s hard to stay on top of the activity. If you have put your faith in one of these challenger banks, you’ll probably enjoy this blog.

It’s not difficult to see why there is so much potential for challenger banks to thrive, and indeed they are doing. With better rates than leading high street names and more personalised services, it’s little wonder that consumers’ heads are being turned as we look to make our money go further.

In the last week alone, experts have warned us that, even if interest rates increase at the rate the Bank of England has promised they will, savers will likely still be getting far less value from their account than if they switch to a challenger bank.

And statistics indicate that online seems to be where we should go to source the accounts with the most value.

challenger vs high street interest rates

Image source: the Telegraph

But it’s not just about the rates. Challenger banks are getting more creative and demonstrating innovative thinking in the services that they provide, the likes of which we just haven’t seen in the banking sector before.

The obvious examples of this are platforms like Monzo, which has totally transformed what’s possible when it comes to tracking our money. Monzo’s cleverly designed app allows users to set monthly spending allowances and, when you make payments using your physical Monzo card, you’ll receive a notification, including additional notifications if you’re spending too quickly. Think of these spending allowances as literal savings pots, with the ability to create as many as you need for things like food, petrol, shopping etc – it’s all about allowing you to manage your full monthly budget within one user-friendly app. Interestingly, you can also still benefit from an overdraft if you choose to have one.

monzo account

Questions have been raised about the levels of security when opting for challengers but, Monzo has demonstrated that their security measures are as good as anyone’s. Earlier this year, events giant Ticketmaster confirmed it had suffered a significant data breach that led to tens of thousands of customers who made purchases between early February and 23rd June 2018 having their card details leaked.

Impressively, Monzo said they’d spotted signs of this breach back in early April and had proactively replaced the cards of all customers who could have been affected.

One thing we’re passionate about at Rhetoriq is ethical business and we doff our metaphorical cap to any company that places sustainability at the core of its business structure. I have to admit that I never expected to see a banking scheme built around sustainability.

But that’s exactly what challenger bank, Tridos, has been quietly focusing on for over three decades now, and it’s admirable to see. Last year they launched their digital current account for consumers, and that comes with some interesting features.

In its earliest form, banking was based on trust and social values. Banks existed to benefit society, not to profit from it, and charging interest was banned by Christianity, Judaism and Islam. It’s unclear how greed gradually began to take over, but the credibility of the industry has been rock bottom since the UK recession in 2008.

Now, Triodos, which first launched its UK operations in 1996, is championing traditional banking values once more.

Just as admirably, they let their results speak for themselves. In 2016 they financed about 70 deals totalling $567 Million in clean energy projects and topped the table against some big competition.

top 20 lead arrangers by number of details

Image Source

In most cases, you very easily suss a company’s values from the way that they choose to work and Triodos has implemented sustainability at the heart of how they operate as a financial services institution.

Unlike most banks, they don’t pay out bonuses based on meeting targets and they follow a simple remuneration system. The bank’s shares are held in a special trust, which is responsible for ensuring that decisions about financial profits are not made at the expense of social and environmental goals. Community comes first.

With roughly €13 billion under management, Triodos is still a relatively small bank, but their lending volumes have continued to rise and shot up by a huge 43.5% to £90 Million from 2016-2017.

Triodos debit cards are also made from PLA – a natural, recyclable plastic that has undergone rigorous testing to confirm its suitability – making them the most environmentally friendly cards available anywhere in the UK.

From charges on carrier bags and Starbucks paper cups etc to the boom in demand for eco-friendly products made from recycled resource, there’s a growing commitment to making our lifestyles more environmentally friendly. Now, it seems that we want to do the same with our money. Statistics show that, in the UK, 63% of us would like to see our savings making a positive social impact and 75% of us would like to know exactly how they’re being used.

In banking, demonstrating social responsibility typically means not supporting businesses in areas we might consider ethical or vices, such as arms, mining, gambling and tobacco industries. Triodos take their commitment even further, with strict guidelines in place that prevent them from lending to businesses that have more than 5% of their balance sheet coming from initiatives without social impact.

Triodos Track Record

triodos infographic

Image Source

To ensure full transparency, they even publish details of exactly where customers’ monies are going.

“In designing this new current account, from the plastic used to the fees and charges structure, we have consistently adhered to Triodos’ principles of transparency, sustainability and fairness.”

– Huw Davies, Head of Retail Banking at Triodos Bank.

The account itself may not be particularly savvy or even the biggest earner, but there could be something in it.  Research carried out by Morgan Stanley’s Institute for Sustainable Investing indicated that 84% of Millennials were interested in Sustainable Financial Services. As a society, we are more environmentally conscious than ever. If there’s scope for a banking system that benefits both its savers and the world we live in, then that can only be a good thing.

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