Challenger banks – upstart lenders looking to take on the major retail players – are fast becoming all the rage with U.K. lenders such as Metrobank launching on the London Stock Exchange. However, there are big questions about whether they'll be able to attract customers, or even if their business models are any different.
There's certainly appetite from investors. Trading of shares in British lender Metro Bank, which was founded in 2010, began on the London Stock Exchange on Monday. And Spain's BBVA said it had acquired Finnish business banking start-up Holvi after pouring a £45 million ($63.7 million) investment in British mobile-only bank Atom last year.
And just last week, another U.K. mobile-only bank called Mondo raised £1 million via equity crowdfunding site Crowdcube in just 96 seconds.
"I think what we're doing and some of the other challengers are doing is trying to appeal to a different segment of the population, the kind of people who live their lives on their smartphones and who expect everything to be doable in a second or two in a single touch," Tom Blomfield, chief executive of Mondo, told CNBC in a TV interview on Monday.
Mondo is a licensed bank in the U.K. and has a free app which allows people to track their spending and get notifications when they use their card. Blomfield said that unlike traditional lenders, Mondo does not charge users fees.