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New UK banks challenge dominance of 'big four'

There may be all kinds of concerns about the cost of office rents in London and access to skilled workers following Brexit, but Britain's financial technology (fintech) sector is still firing on all cylinders.
Confirmation of that came on Thursday as Revolut became the first of Britain's digital-only banks to achieve "unicorn" status - in other words, a privately held start-up company with a valuation of more than $1bn (€720m).
Revolut, which was only founded in July 2015, has been valued at $1.7bn (€1.22bn) in its latest funding round.The bank, which started out as a currency exchange app but later moved into providing personal banking and cryptocurrency trading services, raised $250m (€180m) from backers including DST Global, an investment firm backed by the Russian billionaire Yuri Milner, whose previous early-stage tech investments have included Facebook, Twitter, Airbnb and Spotify.Other backers included existing investors Index Ventures, an early backer of Facebook, Betfair, Just Eat, Skype and Ribbit Capital, whose investments include the peer-to-peer lender Funding Circle.The funding round, Revolut's third, means it has now raised $340m (€243m) from investors.The valuation put on the company is five times the valuation put on it at the time of its last funding round in July last year.Revolut is reckoned to have 1.7 million customers across Europe, 250,000 of whom use the service daily.It intends to use some of the money to support a global expansion taking it into the US, Canada, Australia, Hong Kong and Singapore.
New UK banks challenge dominance of 'big four'

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Online-only banks are attracting more customers - and investors
It expects to raise its number of employees from 350 to 800 by the end of the year and is targeting 100 million customers during the next five years.However, a significant chunk of the money will be required to satisfy the capital requirements of regulators in the countries in which it plans to operate.Nik Storonsky, the founder and chief executive of Revolut, said: "Our focus, since we launched, has been to do everything completely opposite to traditional banks."We build world-class tech that puts people back in control of their finances, we speak to our customers like humans and we're never afraid to challenge old thinking in order to innovate."While Revolut is the first UK digital-only bank to achieve "unicorn" status, it is by no means the only one exciting investors.Others in the space include Atom Bank, founded in 2014 and which was the first digital-only bank to receive a banking licence from the Bank of England.It raised €149m from investors in March.Then there's Monzo Bank, founded in 2015 and which raised €71m from investors last November and Starling Bank, founded in 2014, which this week expanded its services to include extra wealth management services.
Another is Tandem Bank, founded in 2013, whose backers include the eBay founder Pierre Omidyar.
New UK banks challenge dominance of 'big four'

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Britain's major players are increasingly focused on online banking
These upstarts are helping shake-up a banking market completely dominated by the "big four" of Royal Bank of Scotland/NatWest, Barclays, HSBC and Lloyds, which together provide more than seven in every 10 UK current accounts.That rises to four in five once Santander UK is included.The jury is out, though, on the ability of these banks to continue signing up customers at the rate that they have been.A survey carried out last month by RFI, a business intelligence group, found that the number of Britons prepared to move their business to a digital-only bank has fallen to 54% from 78% at the beginning of last year.The fall is thought to reflect the existing major players raising the quality of their service.Some of those major players have also come to the conclusion that "if you can't beat 'em, join 'em".Royal Bank of Scotland is reported to be preparing to move one million of its NatWest customers onto a mobile-only banking platform in a move that would mark the biggest product launch by one of the established major players since the old Midland Bank, now part of HSBC, in 1989.Other lenders, meanwhile, are extolling the virtues of branch banking.Nationwide Building Society is in the middle of a €350m investment programme in which it is refurbishing branches and actually opening new ones, while Metro Bank, the biggest of the new wave of challenger banks to have emerged in recent years, committed in February to open a dozen new branches this year with the creation of almost 900 jobs.It presently has 56 branches, or "stores" as it calls them, and is targeting 200 nationwide in coming years.What all of these new players have in their favour - and that includes Metro Bank - is fresh technology.The established players have legacy IT systems dating back decades that are costly to maintain and which are written in old and often obsolete programming languages.Keeping them updated is a constant challenge and particularly given the increased number of cyberattacks they receive on a constant basis.
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The high-profile failure of TSB's IT systems this week was nothing to do with that - it was due to complications arising from a migration of customer data from the systems of Lloyds, TSB's former owner - but the chances are the major players will suffer similar outages in coming years.Every time they do, the inconvenience is likely to act as a recruiting sergeant for the new generation of digital-only banks, particularly as the UK moves closer to a cashless society.
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