Challenger Banks: Starling Bank, Chetwood Financial, Sovcombank and ClearBank in View From the Top

There are plenty of defining years in the history books, and as
2020 draws to a close, it’s almost certain that the global
pandemic will ensure that this year is featured prominently. With
events cancelled, launches delayed, and country-wide lockdowns, the
way we work has changed forever. Still, for financial technology
and surrounding industries, this was also a year of challenge and

This December, The Fintech Times is asking
industry leaders for their
‘View from the Top’
to gain an insight into the decisions
behind the last 12-months. Today, we’re looking at the issue of
Challenger banks, hearing from Helen Bierton, Andy
Dmitry Gusev
and Charles McManus on their 2020 thoughts, plus a
look ahead to 2021. Will there be a Happy New Year? Read on…

Challenger banks are generally defined as small, relatively new
banks with the aim of directly competing (or challenging) the
traditional highstreet banks. As a result, they are often
incredibly innovative and will usually operate n a digital capacity
– online only or through an app for example. The pandemic has
seen a huge surge in onboarding for these kinds of banks as
customers have needed a new way of achieving their financial
services needs. In this View from the Top, companies
Starling Bank, Chetwood Financial, Sovcombank and
ClearBank outline their own 2020 experience.

Helen Bierton, Chief
Banking Office, Starling Bank

Helen Bierton is the Chief Banking Officer at Starling Bank,
overseeing Starling’s personal and business bank accounts and
marketing. Prior to Starling, she spent 24 years in banking, and in
her opinion, the use of technology in the financial industry has
been a key trend this year

“2020 has been a difficult year for everyone, and while the
world continues to grapple with the impacts of the pandemic, one of
the many things that has shone through has been the power of
technology and how it has truly been a lifeline for many.

“At Starling, we’re extremely proud of some of the ways that
we’ve been able to use our tech to support people. In May, we
became accredited under the Bounce Back Loan Scheme, which we did
alongside providing support via the Coronavirus Business
Interruption Loan Scheme (CBILS). Both schemes have been integral
to supporting thousands of businesses during a challenging time and
it’s been a privilege to have played a part. So far, we’ve been
able to loan over £1.4 billion to our business customers through
these schemes.

“To provide support for some of our more vulnerable customers,
we decided to accelerate the roll-out of our Connected Card, a
second card that customers can connect to their existing account
and give to anyone they trust to pay for groceries and other
essential items on their behalf. Our cheque imaging tool also
enabled customers to continue banking at home which was vital as
many banks closed over lockdown.

“2020 has definitely been a transformational year for
Starling. With nearly 1.8 million accounts and over £1.4 billion
in lending, we were pleased to recently announce that we’re the
first digital challenger bank to break even!

“In 2021, we’ll continue to focus on growing as a profitable
and sustainable bank, and on developing products, including
paid-for products, and money management tools that give our retail
and small business customers the best banking experience.”

Andy Mielczarek, CEO,
Chetwood Financial

For Andy Mielczarek, CEO of North Wales based Digital
Bank Chetwood Financial, the increase in digital banking is one of
the key features of the year.

“It’s a cliché to say that 2020 has been unprecedented.
Looking ahead, however, we believe that the fintech industry will
continue to see positive impacts on the back of Covid into 2021.
For example, the uptick in customers moving to digital banking as a
result of branch closures and restrictions posed by the pandemic is
a positive trend for many fintechs, as it increases the size of
their target market dramatically.

“In addition, as high street banks pulled back from the
digital lending market during the first lockdown, we saw more and
more customers move to newer fintechs who continued to offer them
access to credit. This represents a shift in behaviour which we
expect will continue into 2021, presenting a real opportunity for
product diversification and disruption for lenders.

“We’ve also seen many businesses looking for new revenue
streams to protect themselves from the impact of events such as
Covid. As a result, we’re expecting to see increased interest in
companies like Chetwood that also provide Banking as a Service
(BaaS) or white label opportunities, as a way of adding new revenue
streams to an existing business model. There are already plenty of
use cases for this – from travel agents to professional bodies
– and we expect to see more.”

Dmitry Gusev

Dmitry Gusev is the CEO of Sovcombank, one of Russia’s
largest privately-owned banks. Like the others, he thinks the
transition to digital has been significant this year, particularly
in mortgage lending.

“In addition to giving rise to an e-commerce boom and a surge
in online transactions, 2020 brought an increase in mortgage
lending. All of these trends were ongoing at the start of the year
and were then accelerated as much of the global population stayed
home to prevent further spread of Covid-19. Mortgage lending took a
hit early in the year as the pandemic emerged, but the sector has
proven resilient and benefited from government-subsidised rates
aiming to ensure the industry’s strength, both as a provider of
jobs and as an entity that is interconnected to other sectors.
Sovcombank proactively built loan-loss provisions to increase our
resilience capacity, resulting in a higher margin of safety when
compared to the Russian financial crisis in 2014.

“The determining factors in how well firms navigated the
volatility of the past year are infrastructure and agility. Banks
with an established infrastructure supported by modern technology
were better prepared not just to mitigate any disruption caused by
Covid-19, but to capitalise on the resulting surge in retail
investment. In parallel, firms had to be dynamic and flexible to
simultaneously address challenges and seize opportunities.

“In 2021, the financial and technology industries will take
stock, scrutinising their performance in 2020 to determine areas of
strength and weakness. Firms will then apply that information to
their strategies, whether that involves updating infrastructure,
prioritising agility, or expanding strong mortgage and payments
functions to ensure they are prepared to embrace any future
opportunities that the coming year may bring.”

Charles McManus, CEO,

Charles McManus is CEO of ClearBank, the UK’s first clearing
bank in more than 250 years. In his opinion, Brexit and Open
Banking are going to have the biggest impact on fintech in

“The strength of the UK’s fintech sector not only attracts
investment, creating jobs and wealth, but makes the UK more
resilient, now serving millions of customers. In 2020, that scale
coupled with scandals and the pandemic revealed gaps in governance
and compliance that threaten the sector’s reputation. As fintech
comes of age in 2021, the industry and its regulators must work
together, so regulation can move at the speed of technology and
fortify not just fintech’s future but UK plc’s too. This is
going to play out in two key areas.

“The first is Brexit. The exit creates a complex environment
for banks and fintechs, especially the loss of passporting rights
and question marks over equivalence. Thankfully, we have seen the
FCA step in with regards EIDAS certificates, moving quickly to
permit UK-based TPPs to use an alternative to eIDAS certificates to
access customer account information.

“The second is Open Banking. Open Banking adoption accelerated
in 2020 driven by Covid-19, as consumers and businesses
consolidated accounts to better understand their financial options
during a recession. But Open Banking still isn’t driving the
innovation it was built for.

“I expect to see Open Banking providers partner with payment
gateways to drive account-based
payments outside card scheme networks. This will generate rich
data, unlocking a universe of new
use cases to help Open Banking finally deliver on its promise.

“As we approach 2021, industry and regulators need to work
closely together around Brexit and Open
Banking to fortify the future of fintech.”

The post
Challenger Banks: Starling Bank, Chetwood Financial, Sovcombank and
ClearBank in View From the Top
appeared first on The Fintech Times.