Online Challenger Banks

Lord Ranger of Northwood Excerpts

Monday 27th April 2026 Lords Chamber

Asked by

[Lord Ranger of Northwood]

To ask His Majesty’s Government what assessment they have made of how online challenger banks assess and process new applications for accounts.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the decision to provide banking services is largely a commercial one. Banks have strict obligations to ensure the legitimacy of a new customer and to protect against financial crime, and all new customers opening an account must be subject to due diligence under the money laundering regulations. The regulations are not prescriptive about how this should be done. The FCA expects banks to treat customers fairly and to take a proportionate approach commensurate with their assessment of the risk.

[Lord Ranger of Northwood (Con)]

My Lords, I thank the Minister for that Answer. I welcome the support and the need for regulation of new challenger banks—and all banks—but, in my career of delivering public services with innovation, I have noticed the need to balance innovation with fairness. From personal experience, and more from what I have heard from a great many members of the public, this balance does not seem to be right at the moment in a sector that I really feel we want to champion: fintechs and challenger banks. So does the Minister feel that the balance between the innovation and the growth we are looking to see is right, when we see services providing no explanation or opportunity for engagement when making decisions such as offering banking services, especially as we are now looking at an era of digital assets and agentic banking, where we would like to see fairer digital services for all?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and for our brief conversation last week about some of the issues he has experienced. He will be aware that many of the issues he raises are ultimately commercial decisions for individual financial institutions, and how they choose to communicate with their customers and potential customers are largely decisions for themselves. He will know that, where a bank decides not to allow an account, it can disclose why it has made that decision, but it is not generally required to do so or to provide detailed reasons. In some cases, banks are legally constrained in what they can or are able to say. I think the noble Lord is interested in the use of AI in some of these decisions. The FCA is clear that automation does not remove a firm’s responsibility; it must retain effective oversight of automated decisions and ensure that decisions are fair and made in accordance with regulatory requirements. But, as I say, the decision about how and whether to communicate that is largely a commercial one for the individual financial institution.