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Digital challengers ‘starting to weaken’ stranglehold of large banks – FCA

challenger banks fca
Image credit: Ascannio / Shutterstock

The dominance of traditional retail banks is “starting to weaken” because of the rise in digital challenger banks, the UK’s financial watchdog has said.

The Financial Conduct Authority (FCA) said that shares of personal and micro-business current accounts held by challenger banks rose between 2020 and 2021.

The shift has been driven by “digital innovation and changing consumer behaviour”, the FCA said.

At the same time, the market share of the largest retail banks fell, undermining their “historic advantages”.

The FCA, which made the comments in an update to its 2018 strategic review of retail banking, said the development has led to better choices and lower prices for consumers.

Online banks including Starling, Monzo and Revolut have attracted vast sums of venture capital as investors bet on them loosening the iron grip historically enjoyed by larger banks in the current account market....