New Entrants: Mapping the Landscape
"New Entrants: Mapping the Landscape", report examines some of the most interesting and significant new entrants in the UK, the US, and Europe. This report is based on interviews with industry figures and secondary research.
Market conditions around the world have not historically been particularly friendly to new banking entrants. Stringent regulations have presented formidable barriers to entry, and only a minority of consumers express enthusiasm for banking with new providers. However, regulators in the UK, EU, and elsewhere are trying to make it easier for new providers to enter the market, and a number of new banks have commenced operations, with the UK proving a particularly popular location.
The report offers insight into -
- How regulators around the world are trying to create a more accommodating environment for new entrants.
- The key propositions and characteristics of the most noteworthy new entrants in the UK and beyond.
- What strategies new entrants should employ to maximize their chances of success.
- Consumer mobility in developed markets is low, and switching rates in the UK are falling. Only a small proportion of consumers are willing to use digital-only banks, and adoption will be slow in the short term.
- Regulators in the UK and EU are initiating open banking policies to promote competition, and many authorities have set up regulatory sandboxes to make it easier for start-ups to test their propositions.
- The UK is the single most popular market for new financial providers, with entrants such as Starling Bank, Monzo, and Atom Bank all having launched in the last few years.
Reasons to buy
- Discover how receptive consumers in global markets are to new entrants, and how the regulatory environment is changing.
- Learn about the key new entrants in the UK, France, Germany, and the US and what sets them apart from their competitors.
- Assess the future prospects of these providers.
Table of Contents
1. EXECUTIVE SUMMARY 3
1.1. Market summary 3
1.2. Key findings 3
1.3. Critical success factors 3
2. THE CURRENT LANDSCAPE FOR NEW ENTRANTS 8
2.1. Consumers exhibit a preference for established providers 8
2.1.1. Current account switching in the UK is on the decline 8
2.1.2. Only a minority of consumers are receptive to fintech providers 10
2.1.3. Adoption of banking services provided by new entrants will be slow in the short term 11
2.2. Regulatory developments are opening up the market to challengers 12
2.2.1. PSD2 is set to open up the retail banking market in 2018 12
2.2.2. The CMA has mandated that UK banks provide access to customer data to third parties 13
2.2.3. The FCA has streamlined its procedures for authorizing new entrants 13
2.2.4. The FCA and PRA have partnered to create a New Bank Start-up Unit for the UK 13
2.2.5. Australia and Singapore have also introduced regulatory sandboxes 14
2.2.6. US regulators are trying to ease the authorization process for new banks 14
3. NEW ENTRANTS IN CLOSE-UP 17
3.1. The UK 18
3.1.1. Starling Bank is building a marketplace of third-party products 18
3.1.2. Monzo wants to equip users with detailed information on their spending 20
3.1.3. Atom Bank is gaining a reputation for highly competitive product pricing 23
3.1.4. Tandem will use data-driven insight to inform and advise its customers 26
3.1.5. Monese is successfully targeting the market for recent migrants 28
3.2. Germany 30
3.2.1. N26 is expanding its product range through third-party partnerships 30
3.3. France 33
3.3.1. Compte Nickel has won over underserved consumers with its low-cost account 33
3.4. The US 36
3.4.1. Bee focuses on providing low-cost banking services to lower-income consumers 36
4. RECOMMENDATIONS FOR NEW ENTRANTS 38
4.1. Employ a clear proposition 38
4.2. Target an underserved market 38
4.3. Allocate resources efficiently 38
4.4. Pay attention to profitability 39
5. APPENDIX 40
5.1. Abbreviations and acronyms 40
5.2. Bibliography 40
5.3. Further reading 43
List of Figures
Figure 1: The number of UK consumers switching their current account is falling 9
Figure 2: Only 14% of global consumers are willing to use a digital-only bank for their main banking relationship 10
Figure 3: Consumers in developed markets will be the slowest to adopt fintech services 12
Figure 4: There have been virtually no new commercial banks in the US since 2010 15
Figure 5: Starling Bank’s app offers a flexible overdraft, card management features, and instant payment notifications 19
Figure 6: Monzo’s app offers real-time transaction updates, spending categorization, and card management features 21
Figure 7: Monzo updates its goals and progress to date in a publically accessible roadmap 22
Figure 8: Atom Bank’s app employs a quirky, bubble-type interface 24
Figure 9: Tandem’s app prompts users to take remedial action to improve their finances 27
Figure 10: The Monese account offers basic deposit-taking and payments capabilities 29
Figure 11: N26 recently branched out into personal loans 32
Figure 12: The Compte Nickel app offers push notifications, P2P payments, and card management services 34
Figure 13: Users can deposit funds, save money, and track spending via the Bee mobile app 36
Secondary Research Information is collected from a number of publicly available as well as paid databases. Public sources involve publications by different associations and governments, annual reports and statements of companies, white papers and research publications by recognized industry experts and renowned academia etc. Paid data sources include third party authentic industry databases.
Once data collection is done through secondary research, primary interviews are conducted with different stakeholders across the value chain like manufacturers, distributors, ingredient/input suppliers, end customers and other key opinion leaders of the industry. Primary research is used both to validate the data points obtained from secondary research and to fill in the data gaps after secondary research.
The market engineering phase involves analyzing the data collected, market breakdown and forecasting. Macroeconomic indicators and bottom-up and top-down approaches are used to arrive at a complete set of data points that give way to valuable qualitative and quantitative insights. Each data point is verified by the process of data triangulation to validate the numbers and arrive at close estimates.
The market engineered data is verified and validated by a number of experts, both in-house and external.
REPORT WRITING/ PRESENTATION
After the data is curated by the mentioned highly sophisticated process, the analysts begin to write the report. Garnering insights from data and forecasts, insights are drawn to visualize the entire ecosystem in a single report.