Should you move to a new bank?

Ever since the banking crisis in 2008 there has been plenty of talk about a new wave of banks that will bring competition to the sector. Seven years later, we are now seeing that influx of so-called challenger banks and they are certainly shaking things up. Here's what you need to know about them.

First off, a challenger bank doesn't have to be brand new. Many of them are old names that are either making a move into new areas or international brands establishing a UK presence. For example, Hampshire Trust Bank has been around for nearly 40 years but under new management it's now offering top savings rates, whereas RCI Bank is the UK arm of French RCI Banque, which was created by the Renault car group back in 1974.

However, some challenger banks are brand new. Names such as Charter Savings Bank, Atom or Ipagoo may mean nothing to you now but they could become the high street stalwarts of the future. And they are not alone: there are fledgling banks queuing up to launch.

"The governor of the Bank of England has reportedly got dozens of new banking licence applications awaiting approval, so expect more names in the coming months and years," says Anna Bowes, director of Savings Champion.

"It's an exciting time in financial services with many new players emerging to challenge some of the tired high street names with their battered reputations and unstable IT systems," says independent personal finance analyst Andrew Hagger.

So, which are the banks you need to watch out for?


It only launched in February but RCI is already at the top of some of the savings tables, thanks to a range of very competitive accounts.

It recently upped the interest rate on its Freedom Savings Account in order to keep it at the top of the tables. The unusual move, though, was that it upped the rate for existing customers as well as new. "A rare occurrence in today's savings market, where many providers are actually cutting the interest rates on savings accounts for existing account holders," says Susan Hannums, director at Savings Champion.

But think twice before going for that top interest rate. RCI Bank is not covered by the Financial Services Compensation Scheme (FSCS) that currently protects up to £85,000 per institution. Instead, savers are protected under the EU guarantee system for up to ¤100,000 (around £70,360) – although the FSCS is being brought into line with the EU scheme from 1 January 2016.


This is another challenger that is aiming to capture customers through savings accounts. It has been at the top of the best-buy tables for months. "I've been impressed with Charter Savings Bank," says Hagger. "It offers a wide range of no-frills but very competitively priced savings products and has played its part in a mini rate war that has helped to slowly nudge savings rates upwards."

The bank has already attracted 10,000 customers and more than £500 million in deposits in the five months since it launched. All deposits are covered by the FSCS, too. Certainly a bank to consider if you are looking for a new savings account.


So far the challenger banks have focused on savings accounts but that is about to change. Atom Bank, a brand new bank launching later this year, is planning to take on the high street behemoths with current accounts. The bank is the brainchild of Anthony Thomson, who helped set up Metro Bank five years ago.

It has impressive backing with star fund manager Neil Woodford putting up some of the £25 million needed to start the bank, and the former boss of HSBC's First Direct Mark Mullen as chief executive.

Atom Bank won't have branches. Instead, it will be operated entirely via a smartphone app. It won't be the only challenger to do so as several wannabe banks still waiting to be granted licences, including Starling, Ipagoo and Mondo, all intend to focus on banking apps.

The financial revolution has begun. Only time will tell how big a difference it will make. But so far, at least, we are benefiting from higher savings rates.

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Your Comments

"Buyer beware" recently opend an account with RCI Bank but owing to the fact that neither I or the "techies" at RCI Bank were able to fix the problem when prompted to change password have had to close the account. Whilst customer services were very helpful I am stunned that a bank was unable to resolve the password problem over a four day period. The final solution - to refund my initial deposit ( for which I am still waiting ) and close the account - UNBELIEVABLE!!!!
RCI blamed everything from my internet provider ( VIRGIN ) to my browser - incidentally the problem persisted with EDGE, EXPLORER, CHROME...
I would worry abount using RCI, I have accounts with many financial institutions but never encountered a fiasco such as this. 

Interest isn't the most imporant thing to me when picking a current account. I'd like to see articles about how easy the services are to use and how clear (and sensible) the statements are. 

I found trying to open some accounts especially on line really difficult . Vanquis who advertise a good bond rate require funds from your current account that allows BACS and CHAPS payments . My high street one didn't and the time and hassle of either contacting my bank or transfering money elsewhere was annoying so on I went to Raphaels Bank . Had to print out application form then post to them with a cheque..It then asked for I.D to be signed by solicitor or accountant .I have neither so contacted local solicitor = £35 . I find it best to have several bank accounts and circle money round trouble is I am running out of d/d's !