Challenger banks – challenges ahead?

We’ve got quite used to hearing the misery and bad news associated with UK banks since the financial crisis, yet one of the positive sides to this debate has been the rise of the challenger banks.

These secondary players have grown quickly, with several listing last year as the sector continues to attract both customer and investor interest. The challenger banks have also long been praised by some politicians as being responsible for injecting much-needed further competition into the UK banking sector.

In a recent annual review of the challenger banking sector, there is certainly good news in terms of growth but it has also highlighted some real headwinds that lie ahead. Many challenger banks offer a high quality service and some argue that they are operating more efficiently than the Big Five, albeit in niche markets.

This leaves them poised to take further market share in the year ahead. But some experts are suggesting that many of the challenger banks are no longer budding businesses claiming that they are sizeable establishments and some are realising both the benefits and difficulties that being a large listed company brings.  It will be an interesting year in terms of seeing whether such growth brings with it yet more hurdles for challengers.