>> In the past few years in Britain, a new breed of challenger banks has emerged, competing against bigger, more established rival. App based banks like Monzo and Starling are increasingly popular with cusomers and investors. Monzo's user numbers soared by 300% to 450,000 in 9 months this year. But the growth came at a cost.
Until recently every customer meant a loss of 50 pounds or $67 as Monsoreau offered services such as free overseas cash withdrawals. Reuters UK Banking correspondent, Emma Rumney, said the bank's use of friendly apps offers something different.>> Well they're build on new digital infrastructure. They don't have any branches and they're completely app based.
And they don't do a lot of the traditional services like mortgages, which means they're not weighted by cumbersome IT or brick and mortar buildings, or heavy capital requirements that mean a lot of bigger banks move quite slowly.>> They also have a much lower cost base to work with, so don't charge hefty fees for overdrafts or foreign exchange.
In their untested path to profitability, the digital banks are looking at some unique ways to make money, including building a marketplace.>> It's where third parties can plug into the app and offer their customer services, ranging from insurance to loans and even energy. And every time they successfully nudge a consumer towards using that service based on their account data, they will take a commission.
>> But they face a big challenge in terms of scale. To make the model work, they will need access to a lot of people and a lot of data. And they aren't the only banks trying to pursue the strategy. Much bigger and older companies are now trying to do the same raising questions of whether the digital bank's stellar rise will continue once the competition heats up.