THE boss of digital challenger Starling Bank has said conditions are “still tough” for new market entrants despite renewed efforts to boost competition since the 2008 crash.
Starling founder and chief executive Anne Boden said it was a wave of crisis-era consolidation that prompted UK regulators to launch a new authorisation process which ultimately helped usher in a string of new banks.
Royal Bank of Scotland’s takeover of ABN Amro and Lloyds Banking Group’s acquisition of HBOS, as well as the collapse of Northern Rock and Bradford & Bingley, all left a smaller banking sector in their wake.
While a raft of new firms entered the lending market, Boden said few have managed to push on to launch current accounts for everyday retail customers.
“We were, I think, the second bank to go through that authorisation process. OakNorth was the first and they’re an SME bank,” she said.
“But you know, there was a whole raft of digital startups going through: there was Atom Bank, Tandem Bank, Starling and Monzo.
“And these four banks went through the authorisation process. But only ourselves and Monzo ended up doing current account banking – and that’s hard, that’s difficult.
“So, although the legislation was intended to create new competition, it’s still tough and not many banks have actually managed to sort of launch and thrive.”
The boss of Metro Bank – which itself was the UK’s first high street bank in more than 100 years after its post-crisis launch in 2010 – insists that competition is stronger than it was in 2008. “There are more challenger banks, I think that there’s an acceptance of new organisations and that people can see the banks are trying to create competition,” Craig Donaldson.
“I do think we need to ensure that from the regulatory perspective that they continue to encourage growth of competition.”
He warned that Britain’s divorce form the EU could overshadow efforts to support new players.
“With all this focus on Brexit, there’s just a danger that they forget to continue to focus on creating a competitive environment. And you know, Brexit has become all-encompassing for some and actually we have a country to run at the same time.”
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