Lending

Banking on an alternative: The rise of challenger banks

Mark Sismey-Durrant, CEOat Hampshire Trust Bank, discusses the diversification of the challenger bank sector and what this means for SMEs.

Challenger banks have been shaking up the banking world over the past few years, transforming the way small businesses access the vital finance and capital needed for them to grow. Despite recent economic upheaval, this new wave of banks continues to offer a real alternative for smaller businesses.

They have been revolutionising the world of finance over the past few years and stealing market share from banking heavyweights. Offering a combination of flexible, diverse and competitive products combined with a more personal service, these banks are becoming increasingly popular with smaller firms.

However, as a study by the Enterprise Research Centre found, one-quarter of all business owners within the UK still say finance is their biggest barrier to growth and there is more to be done to meet the needs of smaller firms. That’s why we are witnessing a diversification within the challenger bank space, including an emergence of institutions that specialise in a particular sector or are focused on an audience group. As a result, these banks offer a more specialist proposition to smaller business leaders, with experts in place to help solve niche problems that firms couldnt necessarily solve with another bank.

Specialist challenger banks offer a personalised service and approach which has proven necessary for smaller companies to operate successfully. Research from the University of Bristol has found that small businesses in particular want a named contact at their bank to personally deal with their business banking needs. In comparison to the banking heavyweights, specialist challenger banks often have expert teams, that have decades of experience in certain sectors, which can support on delivering the right finance at the right time for firms.