High street banking has long been dominated by Britain's Big Four banks - HSBC, Barclays, Lloyds and NatWest - prompting Britain to make it easier for new banks to enter the market, and for customers to switch banks with little fuss.
However, there are signs that some of the historic advantages of large banks may be starting to weaken through innovation and digitisation and changing consumer behaviour. Building market share has been an “expensive and slow process” for new banks and mid-tier lenders like Santander and Nationwide, though those based purely online such as Starling and Monzo are making progress with around 8% of personal customer accounts.
As customer inertia is acting as a barrier to expansion among challengers, the Big Four banks continue to achieve higher returns on capital, a key measure of profitability, than most other banks, but the gap has narrowed.
