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The banking and finance industry is a competitive shared space between traditional and alternative providers. While the industry is a haven for innovation hungry competitors, they must be technologically ambitious and trailblazing in their approach to survive.

The UK fintech industry is the epitome of ingenuity, recognised globally for its innovative regulatory framework, advanced payment technology, and world-class sustainability standards.

The UK accounts for 11% of the global fintech industry and is home to some of the world’s leading digital-first banks, such as Revolut and Monzo. This is a testament to the successful rise of alternative banking providers in the UK, and the growing challenge for traditional finance providers to stay ahead of the curve.

Tom Procter, a Business Debt Expert at Solvent Liquidation, explains how traditional finance providers raise their standards to compete with alternative providers to survive.

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46% of UK business leaders trust online-only banks and traditional high street banks equally

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The race against digital innovation

Traditional banking providers are up against a digital revolution powered by fintech companies transforming the basic principles of personal and business banking.

While traditional banks once reigned the market, it is now an equal split with challenger banks on the other end. A survey by NerdWallet found that 46% of UK business leaders trust online-only banks and traditional high street banks equally.

Challenger banks are modernising the banking industry by developing state-of-the-art banking technology to make banking open and accessible to individuals and businesses outside of the high street and on a global scale.

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the average person is using three to four apps to manage their financial lives

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How are traditional banks fighting back?

The challenge is on for traditional banks to ramp up their offering to compete with challenger banks. Nearly nine out of 10 people are using some type of fintech app, and the average person is using three to four apps to manage their financial lives, according to Plaid.

What are traditional banks doing to retain customers and level the playing field...

Reducing dependence on physical presence

Traditional banks have historically relied on a heavy high street presence to connect with customers. Today, just 5,000 bank branches remain—a 75% decrease since 1980.

The rise of e-commerce and digital banking spearheaded this change, along with eliminating the bulk of overheads attributed to renting and leasing prime high street property. By reducing physical presence, traditional banks can repurpose this cash for digital investment.

Investing in digital transformation

Traditional banks typically maintain multiple branches of banking, such as web, app, and in-person, while challenger banks are structurally leaner as they typically focus on one core platform. As customer needs move towards digital access, traditional banks are also shifting their focus towards their digital platforms.

For example, NatWest Group’s planned investment of £3.5 billion from 2023 to 2025 will see more than 70% of spending targeted to data and technology, such as digitalisation, machine learning and artificial intelligence.

Customer-centric approach

The success of challenger banks such as Monzo, Starling Bank, and Revolut can be attributed to their customer-centric approach. The user is at the heart of every decision which makes for banking portals that are highly intuitive and user-friendly.

The integration of artificial intelligence (AI) has propelled the speed and effectiveness of chatbots programmed to handle banking enquiries. In 2023, NatWest’s AI-powered chatbot, Cora, handled 10.8m retail banking customer conversations, 49% of which needed no human intervention.

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Reinventing traditional banking

While challenger banks are growing in popularity and rewriting the industry’s fintech benchmarks, traditional banks are using this as fuel to reconstruct their approach to banking and advance their technological abilities.

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​	Tom Procter is a company debt expert with years of experience in supporting limited company directors across all aspects of corporate insolvency, including company liquidation and restructuring. Solvent Liquidation is part of the Begbies Traynor Group.