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New Entrants: Mapping the Landscape

New Entrants: Mapping the Landscape

Summary

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 expresses 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.

Critical success factors

  • Use open banking to form strategic partnerships: Incumbents should consider emulating new entrants such as Starling Bank and N26 that are building open API-based marketplaces for third-party products. By sourcing best-in-class products from the whole market, banks can quickly address shortcomings in their own product ranges.
  • Leverage customer data for better insight: Customer transactional data is one of the most valuable assets a bank possesses. As Tandem is doing, use this information to offer relevant and targeted advice to customers that provides them with clear and quantifiable financial benefits.
  • Create specialist sub-brands: Create separately branded subsidiaries that appeal to specific consumer segments. Such sub-brands can take a more innovative and adventurous approach to product and service provision without affecting the core brand’s proposition.
Key points include -
  • 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.
The report New Entrants: Mapping the Landscape 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.

In particular, this 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?
Companies mentioned in this report: Atom Bank, Bee, Compte Nickel, Monese, Monzo, N26, Starling Bank, Tandem.

Scope
  • 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.


  • Executive Summary
    • Market summary
    • Key findings
    • Critical success factors
  • The Current Landscape for New Entrants
    • Consumers exhibit a preference for established providers
      • Current account switching in the UK is on the decline
        • Table figure 1: The number of UK consumers switching their current account is falling
      • Only a minority of consumers are receptive to fintech providers
        • Table figure 2: Only 14% of global consumers are willing to use a digital-only bank for their main banking
      • Adoption of banking services provided by new entrants will be slow in the short term
        • Table figure 3: Consumers in developed markets will be the slowest to adopt fintech services
    • Regulatory developments are opening up the market to challengers
      • PSD2 is set to open up the retail banking market in 2018
      • The CMA has mandated that UK banks provide access to customer data to third parties
      • The FCA has streamlined its procedures for authorizing new entrants
      • The FCA and PRA have partnered to create a New Bank Start-up Unit for the UK
      • Australia and Singapore have also introduced regulatory sandboxes
      • US regulators are trying to ease the authorization process for new banks
        • Table figure 4: There have been virtually no new commercial banks in the US since 2010
  • New Entrants in Close-Up
    • Table Summary of key new entrants in the UK, Germany, France, and the US
    • The UK
      • Starling Bank is building a marketplace of third-party products
        • Table figure 5: Starling Bank's app offers a flexible overdraft, card management features, and instant payment
      • Monzo wants to equip users with detailed information on their spending
        • Table figure 6: Monzo's app offers real-time transaction updates, spending categorization, and card
        • Table figure 7: Monzo updates its goals and progress to date in a publically accessible roadmap
      • Atom Bank is gaining a reputation for highly competitive product pricing
        • Table figure 8: Atom Bank's app employs a quirky, bubble-type interface
        • Table Mobile banking apps - average user scores on Google Play (as of April 21, 2017)
      • Tandem will use data-driven insight to inform and advise its customers
        • Table figure 9: Tandem's app prompts users to take remedial action to improve their finances
      • Monese is successfully targeting the market for recent migrants
        • Table figure 10: The Monese account offers basic deposit-taking and payments capabilities
    • Germany
      • N26 is expanding its product range through third-party partnerships
        • Table figure 11: N26 recently branched out into personal loans
    • France
      • Compte Nickel has won over underserved consumers with its low-cost account
        • Table figure 12: The Compte Nickel app offers push notifications, P2P payments, and card management services
    • The US
      • Bee focuses on providing low-cost banking services to lower-income consumers
        • Table figure 13: Users can deposit funds, save money, and track spending via the Bee mobile app
  • Recommendations for New Entrants
    • Employ a clear proposition
    • Target an underserved market
    • Allocate resources efficiently
    • Pay attention to profitability
  • Appendix
    • Abbreviations and acronyms
    • Bibliography
    • Further reading

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