PwC is supporting 15 potential new challenger banks on their quest to gain banking licences in the UK, with at least eight in the pipeline as of January 2017.

A PwC report in collaboration with the BBA found that UK consumers are increasingly willing to open separate bank accounts to their existing one, with 54 per cent prepared to diversify to get the best deals, against 30 per cent who would prefer one bank for everything.

Four in ten customers surveyed by the accounting firm said that they would consider opening a financial account with a bank that would share their financial data with other banks and third parties (e.g. Amazon, Apple, etc). In return they would receive benefits such as an overall view of all accounts in a single app, or being able to compare product offers from third parties which are tailored for them (e.g. savings accounts with better rates, cheaper utilities providers, credit card offers, personal loans when getting close to becoming overdrawn).

As a result of policymakers driving increased competition, the report said, there has been a rise in the number of new banking licences, including 15 in the last three years.

Challenger banks supplied 200,000 British consumers with mortgages in 2015, and increased their share of small and medium-sized enterprise (SME) gross lending to 20 per cent, providing new loans and overdrafts to around 50,000 companies.

The study goes on to suggest that Open Banking will drive a fundamental change in the banking landscape, giving rise to new business models. Specialist providers in narrow areas rather than a traditional suite of products are on the rise, while some may compete by integrating niche offerings from a number of different companies in a seamless way.

John Lyons, head of retail and commercial banking at PwC, said: “The term ‘challenger’ implies the ‘plucky underdog’, a label that doesn’t hold for what are in some cases long-established and significant businesses. Many of these banks’ distinctive offerings mean they do not need to compete directly with the large high street banks to succeed.

“Their USPs are often around client franchise or need, geographic location or product specialism. Specialist lenders in particular aspire to operate in the gaps left by other banks, typically addressing customers with more complex needs rather than the ‘vanilla prime’ segments.”

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