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digital money
Igniting Payments Change
In this Corner: Challenger Banks
Getting mobile right is also key for a growing breed of banks launch- ing in Europe and in the U.S. The term “challenger bank” is most often used in Europe, where start- ups are catering to mobile- rst consumers and more than138 million consumers without formal banking relationships, according to Mastercard research. Such providers also are launching in the U.S., where the FDIC’s latest data
Wirecard’s boon. mobile app
is one example of the company’s e orts to put payments
at consumers’ ngertips.
estimate 51.1 million adults are underbanked and 15.6 million are unbanked. Digital challengers say they can o er better services than traditional banks and are targeting millennials as well as disenchanted bank customers.
Joining Green Dot’s GoBank and Simple in the U.S., Varo Money launched in 2016, o ering private- label checking and savings ac- counts through its relationship with The Bancorp. After closing
a $27.4 million funding round in May of 2016, led by Warburg Pincus, Varo initially began target- ing millennials. (For more on Varo, see page 20.)
Meanwhile, Atom Bank in the
U.K. opened its virtual doors with an invitation-only rollout to pre- registered customers in April of 2016. In October, the company opened to the whole of the U.K., and by December it was reporting deposits exceeding £110 million (US$136 million) across its Fixed Saver accounts. But Atom faces considerable competition in the U.K., where there are nearly 50 challenger banks in all.
pledges with a prepaid Mastercard, instant spending noti cations, budget management and no set- up or usage fees, including free spending abroad.
“The platform has always been known for its exibility, which is attractive to challenger banks because it means they have more options as well as speed to mar- ket,” says Suresh Vaghjiani, manag- ing director, EMEA, GPS.
The processor has signed up two of ve challenger banks to be granted full banking licenses by the Bank of England and is in nal discussions with two more, Vaghjiani says. “If they wish to provide a service that really challenges what the high street banks can o er, challenger banks recognize that they need to use a next-generation processor.”
GPS built its platform to give clients a exible and con gurable hierarchy for control of card usage, limits and fees. By using an open architecture and the cloud, the core application can support integration with other GPS modules and third-party systems, giving clients real-time access to a range of channels and interfaces, according to Vaghjiani.
Citing Mastercard and Visa data, GPS says it’s the fastest-growing processor in Europe, but it oper- ates globally. Speed to market and control are important factors in the company’s growth, he adds. For example, one multiregion roll- out—which included integration with a new card manufacturer in
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Global Processing Services (GPS), which describes its processing platform as a game changer,
says it provides the “engine room” for three such banks in Europe— Starling, Holvi and Monzo. In March, Starling launched its beta mobile app and debit card pro- gram, promising a user experience that helps users stay on top of their nances in real time and save with tracking goals. Meanwhile, Holvi is targeting other entrepre- neurs with a digital business account combined with built-in business apps like paperless book- keeping and invoicing. And Monzo has scored more than £12 million (US$14.83 million) in crowdfunding