Who are the best challenger banks in the UK for 2026?

Challenger bank accounts are newer, digital-only (and sometimes app only) entrants to the financial markets, which compete directly with established banks. They often do this by playing to their strengths as a smaller organisation and offering a specialism which has been underserved by the big banks.

Where incumbent banks are large and cumbersome, challenger banks can be quick and agile, innovating more quickly and providing a customer-focused online service, which is often lacking among larger banks.

Their secret sauce is digital. Although some, such as Metro Bank, have branches, most are digital-only operations delivering banking services via online platforms and mobile apps. Without the costs of maintaining costly bricks & mortar branches, they can often deliver better value services to customers. Indeed, they often highlight their more sustainable, customer-first approach as being a key point of differentiation against their established competitors.

• What are the best bank account switching offers?

Top UK challenger banks 2026 reviews

1. Starling Bank Reviews
2. Revolut Reviews
3. Monzo Reviews
4. Metro Bank Reviews
5. Monese Reviews
6. Atom Bank Reviews

Why the UK loves challenger banks

Britons’ growing preference for challenger banks is backed by a clear shift in how people actually use their bank accounts. According to data from YouGov, 73% of British adults used a bank’s mobile app in the past year, making it the most common way to manage money, while 84% prefer to check their balance digitally and 83% prefer to pay bills online.

Physical branches now play a far smaller role, with only 31% visiting a branch in the last 12 months, compared with 61% using internet banking. The trend is even more pronounced among younger customers: 79% of Gen Z and 85% of millennials use mobile banking, compared with just 55% of baby boomers, highlighting a strong generational tilt towards app-first banking.

These behaviours closely mirror the strengths of challenger banks—mobile-led, self-service and always-on—helping explain why they continue to win market share as everyday banking becomes something Britons expect to manage quickly, digitally and on their own terms.

Pros and cons of challenger banks

Pros

• Better value: Without the need to pay for physical infrastructure challenger banks often pass the savings over to customers in the form of lower fees.
• They thrive with tech: Traditional banks have been slow to adapt to new technologies. Many have been used to doing things in a certain way with vast legacy systems which take a huge effort to overhaul. Challenger banks pinpointed technology as window of opportunity from the get-go. They understand it and use it much more effectively.
• More efficiency: Their command of all things digital often means that they can deliver services faster and more efficiency than the larger counterparts.

Cons

• Smaller size: While their small size is a benefit it can also be a weakness. Many of these banks are new to market and are still working their way to financial sustainability. That means the possibility of failure is higher. All challenger banks are subject to the FCA, with customer deposits being protected up to £120,000, but if you’re a business or a larger customer you may feel more secure going with someone more recognised.
• Lack of branches: Not everyone likes to do all their banking online. Sometimes having a physical branch to go to can be reassuring.
• They’re not all that different: While they set themselves up as a kinder alternative to traditional banks, you’ll still be subject to credit checks. So, if you’ve had credit problems in the past, they may not represent such a great alternative after all.

However, they lack the customer service and added value that private banks can offer high-net-worth individuals.

One of the most common complaints about challenger banks is the lack of personal service if something goes wrong or there is a complicated bank issue that needs extra attention

How safe is your money with a challenger bank?

Like all other financial institutions, challenger banks are regulated by the FCA. As such, all deposits are protected under the Financial Services Compensation Scheme. This ensures that, if the bank were to fold, your deposits will be protected up to a maximum of £120,000.

Theoretically, this does give you exactly the same protections as a big bank. However, these newer players are less established than the major banks. They do not have the same track record, and many are still in the start up phase. This means they are more likely to fail than a longer-established bank. If you have savings of more than £120,000 you may want to consider using a range of different banks and keep account balances below the threshold.

How do challenger banks make money?

Traditional banks make money in two ways:

1. By charging fees such as for ATM withdrawals and late payment.
2. By charging interest on credit, like overdrafts, credit cards and loans.

Most Challenger banks offer no fee banking as a form of differentiation from the traditional market. Many are not large enough and do not have the necessary regulatory permissions to offer lending services, which means they have to get innovative.

Some of the most common options are:

• Premium services: By offering premium services such as insurance products, special features or accounts with higher interest rates, they can charge a fee for some customers.
• Marketplaces: Many challenger banks create marketplaces in which they offer services to customers. This may involve their own products and those of third parties who may pay a commission for business which comes through the platform.
• SME: Business banking traditionally attracts fees. However, small businesses are often underserved by the traditional banks. By adopting products which can cater to this market, they can find ways to drive revenue.
• Credit services: Those challenger banks which have been more successful and have gained banking licenses are offering products such as loans and mortgages.