Challenger banks shake up the savings market | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

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Published: 26/07/2017

Challenger banks have been keeping the savings market alive for some time. They're the only ones competing for savers' cash, and as a result, the only ones offering decent returns. Happily, this trend doesn't seem to be slowing down, and with another new bank having just left the starting blocks, competition remains alive and well – and it's having a welcome impact on savings rates.

Challengers to the rescue

The last year has seen a whole host of new entrants to the savings market, including Atom Bank last October, Zenith and Masthaven Bank in November, Ford Money in April this year and, on Monday this week, PCF Bank Limited. All of them launched with highly competitive rates, and PCF is no exception – its short-term bonds have stormed straight into the Moneyfacts charts, while its notice account pays the top rate for a 100-day term, so it certainly looks as though it'll be a force to be reckoned with.

Which is great news for savers! Our research often points to intense competition between these smaller banks, as they continually leap-frog one another to try and establish themselves in the charts, simply because they still need savers' cash. They have to build their balance sheets somehow, and the easiest way to do that is to attract savers – particularly fixed rate savers – and the only way to do that is to offer competitive rates.

This is why we've seen average fixed rates rise dramatically in recent months, with many standing at 11-month highs – and by all accounts, they could improve even more in the months ahead.

"Challenger banks are keen to attract savers' deposits for longer-term funding, and they need to prove to consumers that they are a brand that can be trusted," said Rachel Springall, finance expert at Moneyfacts. "As we pass the halfway point of the year, some providers may well be reviewing their overall deposit targets and amending interest rates to entice new money, which is fantastic news for savers all round.

"Some of the fiercest competition in the market is coming from these challenger banks who, unlike the high street brands, still desire savers' deposits. Most recently we have had brands including Axis Bank UK Ltd, Charter Savings Bank, Fidor Bank, Harrods Bank, Paragon Bank and RCI Bank all increase rates on a selection of fixed savings accounts, some of which are Best Buy worthy."

Don't fear the unknown

The only issue people may have with challengers is that, in many cases, they're not well known. Opting for a bank you're not familiar with could well be daunting – they don't have the high street presence or authority of the big banks, and you may be concerned about their reliability and security. Well, there's no need to fear!

These challenger banks come with the same financial protection as their better-known counterparts, so you needn't worry about losing your funds in the unlikely event that the bank went bust. They need to comply with the same rules and regulations as the big boys, too, and you could even find they offer better service – they don't have the same legacy issues as some of the bigger banks, and they certainly pay better rates. Remember that loyalty doesn't always pay!

Get in on the action!

Whether you're after a one or two-year bond, an easy access account, a notice account or a longer-term fixed rate, you'll be able to find the best possible deal with a challenger bank. Just take a look at our Best Buys and you'll see that challengers dominate the market – but you may not want to hang around if you spot the account for you.

"Challenger banks work very differently to mainstream banks," explained Rachel. "They need to manage the flow of funds much more closely, and if they need more deposits they may improve rates to grab savers' attention – but if they're getting too many, they will look at dropping rates. This means any saver thinking about a Best Buy deal shouldn't wait around too long, as a head-turning rate won't be on offer for long."

The only downside will be for savers who don't (or can't) do internet banking, because many of the best savings deals are only available online. However, if you're happy with this method of operating, what's holding you back? A decent interest rate can provide peace of mind over the coming months and years, particularly during the current period of uncertainty, so if you want to find the best account possible, make sure to consider challengers.

What next?

Compare the best savings rates and see why challengers are worth considering


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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