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The UK regulators have done amazing work making it possible to start new "challenger" banks. We started 3 and a half years ago, so this kind of guide would hav

The UK regulators have done amazing work making it possible to start new "challenger" banks. We started 3 and a half years ago, so this kind of guide would have been super useful for us at the beginning. It was a bit more opaque back when we did it, before us only a handful of new banks had been created since Metro bank, and that was the first in 125 years..

cpach 8y ago
Cool! May I ask what bank you are referring to? :)
- pjc50 8y ago
  Googling suggests Monzo: https://monzo.com/blog/authors/simon-vans-colina/ https://monzo.com/blog/authors/simon-vans-colina/
  - simonvc 8y ago
    Have an upvote :)
tpurves 8y ago
How does the regulatory environment in NA (USA/Canada) compare vs UK when it comes to starting a challenger bank?
- otoburb 8y ago
  Canadian banking is a protected industry. It is fiendishly difficult to set up a new bank due to Canada's proximity to the United States and the fear that larger international banks will (eventually) swallow up the Canadian banking system. US banking is slightly easier, in the sense that one may be able to either go through the tortuous process of setting up your own bank, or buying a corporation with the requisite licenses and (ideally) existing customer base. EDIT: Rogers Communications (a Canadian telecommunications provider) applied for a banking license in September 2011 and launched in 2013[1]. I believe the bar is somewhat lower for existing domestic/Canadian companies. [1] https://en.wikipedia.org/wiki/Rogers_Bank https://en.wikipedia.org/wiki/Rogers_Bank
  - microcolonel 8y ago
    > Canadian banking is a protected industry. It is fiendishly difficult to set up a new bank due to Canada's proximity to the United States and the fear that larger international banks will (eventually) swallow up the Canadian banking system. That said, once you get there, the sorts of things you're allowed to do as a bank are pretty staggering (but this tends to lead to efficiency, and in turn stability). Added: There is a golden path to becoming a bank under the Federal Bank Act these days, and it generally includes becoming a creditor first. Much of the process is about waiting for nearly inevitable approvals.
- HoyaSaxa 8y ago
  It is very unlikely that you would be granted a banking charter in the United States for a 'challenger' bank model. The FDIC (and other regulators) have started to approve some de novo (new) banks[1], but these are very much the run of the mill community banks that are not looking to disrupt. The regulators in the U.S. will finally give in, but we're more likely to see a 'challenger' bank as a spin out of an existing bank over the next few years IMO. N26 and other UK/European challenger banks are entering the U.S. market this summer, but they will not have a banking license. [1] https://www.americanbanker.com/slideshow/rebirth-the-de-novo-bank-class-of-2018 https://www.americanbanker.com/slideshow/rebirth-the-de-novo...
rb808 8y ago
How does it feel though when any competitor can also create a new bank easily?
- tixocloud 8y ago
  Creation of new banks is only just the beginning. It takes a good while to ramp up on trust. When you consider the enormous customer bases and monetary volumes of large banks, you will see that there is enough of the pie for everyone to be successful.
  - simonebrunozzi 8y ago
    That's true. Creating trust is a slow process. You can't simply buy a marble quarry to speed it up :) (not sure if it's easy to catch my reference)
tixocloud 8y ago
What you guys are doing is quite interesting and it’s made my job all the more interesting. I do wish I could do the same as what you’ve done and disrupt the Canadian banking system. The UK banking system seems incredibly more efficient and fair to consumers than the Canadian banking system does.
- osrec 8y ago
  Just wondering, how has it made your job more interesting?
  - tixocloud 8y ago
    From experiences working at large banks with huge customer volumes and balances, the question always used to be how much more money can we make. Sometimes it feels like we don’t have to do much and it’s still a profitable machine by default. Having challenger banks makes it interesting as it pushes me to think more outside the box and have ammunition to convince internal stakeholders to experiment with new concepts. I also have a hypothesis that there are some things you can do digital-only and some things you need some human interaction so looking at what challenger banks are doing is a form of validating my hypothesis.
    - osrec 8y ago
      That's an interesting perspective - thanks for sharing!
- moltar 8y ago
  Lets do it! - fellow Canadian annoyed by our banking system
  - tixocloud 8y ago
    I'd be happy to have a chat if you're interested.
    - 8y ago
chr15p 8y ago
> before us only a handful of new banks had been created since Metro bank, and that was the first in 125 years.. I think thats the point of this push by the Bank Of England. UK high street banking was dominated by a handful of huge, old, banks that had to be bailed out during the 2008 banking crisis because pretty much the entire population used them. A larger number of smaller banks reduces the moral hazard around "too big to fail" banks, allows management who cause a bank failure to lose their jobs, their share options, and their company, and reduces the chances of the government having to nearly bankrupt itself to bail them out. Plus if London wants to continue to be a world centre of finance then encouraging innovative new banks to base there cant exactly do any harm.
- neilwilson 8y ago
  A government in its own currency can never go bankrupt. The bailing out procedure should become a prepackaged administration process via the central bank. Banks should know if they exhaust their capital buffers the bank will be placed into administration and refloated by the central bank. ALL equity holders in the bank will make a total loss. That then sets expectations correctly.
  - fwdpropaganda 8y ago
    > A government in its own currency can never go bankrupt. Argentina defaults about once a decade. I wonder what would move you to make such an obviously false statement.
  - sangnoir 8y ago
    > A government in its own currency can never go bankrupt. Zimbabwe would like to have a word. I bring this up not to be snarky, but because that was the thinking of the president at the time - he once asked "Have you ever heard of a country that collapsed because of borrowing?"[1]. I suppose he said this before the hyperinflation kicked in. 1. https://www.economist.com/news/middle-east-and-africa/21731449-his-secret-was-talk-eloquently-and-carry-big-stick-how-robert-mugabe-held https://www.economist.com/news/middle-east-and-africa/217314...

cpach 8y ago

Cool! May I ask what bank you are referring to? :)

pjc50 8y ago
Googling suggests Monzo: https://monzo.com/blog/authors/simon-vans-colina/ https://monzo.com/blog/authors/simon-vans-colina/
- simonvc 8y ago
  Have an upvote :)

tpurves 8y ago

How does the regulatory environment in NA (USA/Canada) compare vs UK when it comes to starting a challenger bank?

otoburb 8y ago
Canadian banking is a protected industry. It is fiendishly difficult to set up a new bank due to Canada's proximity to the United States and the fear that larger international banks will (eventually) swallow up the Canadian banking system. US banking is slightly easier, in the sense that one may be able to either go through the tortuous process of setting up your own bank, or buying a corporation with the requisite licenses and (ideally) existing customer base. EDIT: Rogers Communications (a Canadian telecommunications provider) applied for a banking license in September 2011 and launched in 2013[1]. I believe the bar is somewhat lower for existing domestic/Canadian companies. [1] https://en.wikipedia.org/wiki/Rogers_Bank https://en.wikipedia.org/wiki/Rogers_Bank
- microcolonel 8y ago
  > Canadian banking is a protected industry. It is fiendishly difficult to set up a new bank due to Canada's proximity to the United States and the fear that larger international banks will (eventually) swallow up the Canadian banking system. That said, once you get there, the sorts of things you're allowed to do as a bank are pretty staggering (but this tends to lead to efficiency, and in turn stability). Added: There is a golden path to becoming a bank under the Federal Bank Act these days, and it generally includes becoming a creditor first. Much of the process is about waiting for nearly inevitable approvals.
HoyaSaxa 8y ago
It is very unlikely that you would be granted a banking charter in the United States for a 'challenger' bank model. The FDIC (and other regulators) have started to approve some de novo (new) banks[1], but these are very much the run of the mill community banks that are not looking to disrupt. The regulators in the U.S. will finally give in, but we're more likely to see a 'challenger' bank as a spin out of an existing bank over the next few years IMO. N26 and other UK/European challenger banks are entering the U.S. market this summer, but they will not have a banking license. [1] https://www.americanbanker.com/slideshow/rebirth-the-de-novo-bank-class-of-2018 https://www.americanbanker.com/slideshow/rebirth-the-de-novo...

rb808 8y ago

How does it feel though when any competitor can also create a new bank easily?

tixocloud 8y ago
Creation of new banks is only just the beginning. It takes a good while to ramp up on trust. When you consider the enormous customer bases and monetary volumes of large banks, you will see that there is enough of the pie for everyone to be successful.
- simonebrunozzi 8y ago
  That's true. Creating trust is a slow process. You can't simply buy a marble quarry to speed it up :) (not sure if it's easy to catch my reference)

tixocloud 8y ago

What you guys are doing is quite interesting and it’s made my job all the more interesting. I do wish I could do the same as what you’ve done and disrupt the Canadian banking system. The UK banking system seems incredibly more efficient and fair to consumers than the Canadian banking system does.

osrec 8y ago
Just wondering, how has it made your job more interesting?
- tixocloud 8y ago
  From experiences working at large banks with huge customer volumes and balances, the question always used to be how much more money can we make. Sometimes it feels like we don’t have to do much and it’s still a profitable machine by default. Having challenger banks makes it interesting as it pushes me to think more outside the box and have ammunition to convince internal stakeholders to experiment with new concepts. I also have a hypothesis that there are some things you can do digital-only and some things you need some human interaction so looking at what challenger banks are doing is a form of validating my hypothesis.
  - osrec 8y ago
    That's an interesting perspective - thanks for sharing!
moltar 8y ago
Lets do it! - fellow Canadian annoyed by our banking system
- tixocloud 8y ago
  I'd be happy to have a chat if you're interested.
  - 8y ago

chr15p 8y ago

> before us only a handful of new banks had been created since Metro bank, and that was the first in 125 years.. I think thats the point of this push by the Bank Of England. UK high street banking was dominated by a handful of huge, old, banks that had to be bailed out during the 2008 banking crisis because pretty much the entire population used them. A larger number of smaller banks reduces the moral hazard around "too big to fail" banks, allows management who cause a bank failure to lose their jobs, their share options, and their company, and reduces the chances of the government having to nearly bankrupt itself to bail them out. Plus if London wants to continue to be a world centre of finance then encouraging innovative new banks to base there cant exactly do any harm.

neilwilson 8y ago
A government in its own currency can never go bankrupt. The bailing out procedure should become a prepackaged administration process via the central bank. Banks should know if they exhaust their capital buffers the bank will be placed into administration and refloated by the central bank. ALL equity holders in the bank will make a total loss. That then sets expectations correctly.
- fwdpropaganda 8y ago
  > A government in its own currency can never go bankrupt. Argentina defaults about once a decade. I wonder what would move you to make such an obviously false statement.
- sangnoir 8y ago
  > A government in its own currency can never go bankrupt. Zimbabwe would like to have a word. I bring this up not to be snarky, but because that was the thinking of the president at the time - he once asked "Have you ever heard of a country that collapsed because of borrowing?"[1]. I suppose he said this before the hyperinflation kicked in. 1. https://www.economist.com/news/middle-east-and-africa/21731449-his-secret-was-talk-eloquently-and-carry-big-stick-how-robert-mugabe-held https://www.economist.com/news/middle-east-and-africa/217314...