Challenger banks are newer, digital-first institutions that operate with modern technology, avoiding the legacy issues that traditional banks face.
Why is Option B Correct?
They lack outdated IT systems that traditional banks struggle to upgrade.
They focus on digital banking services, reducing operational inefficiencies.
Examples: Monzo, Starling Bank, Revolut.
Why Not Other Options?
A (Central bank) → Not a commercial bank; deals with monetary policy, not retail banking infrastructure.
C (Online bank) → Some online banks are part of traditional banks, inheriting legacy issues.
D (Retail bank) → Large banks have aging IT systems, regulatory burdens, and high costs.
???? Reference: UK Financial Conduct Authority (FCA) - Challenger Banks Report, CISI Wealth & Investment Management.
