Neobanked - 001 Welcome
To begin, let’s look back on 2019.
Welcome to Neobanked, a newsletter focused on the quickly evolving UK digital banking market. I hope to gather enough interesting tidbits and news to share this every two weeks.
For me, Neobanks are digital-only offerings that apply internet economics (i.e. zero marginal costs) to the banking sector. My focus will be on companies such as Monzo, Revolut, Starling, and N26.
Through this newsletter I hope to cover each of these companies as they continue to grow within the UK and beyond. Some of the regular features will include user number growth, new product/feature releases, and links to relevant interviews and analysis.
For this inaugural issue, let’s start with a look back at 2019 for the major Neobanks.
Monzo began 2019 with ~1,250,000 UK users and grew this to ~3,500,000 by the end of the year. Part of this growth has been strongly attributed to their first TV ad campaign that started in May 2019. Their headcount is now ~1,500, mostly in the UK.
Monzo’s expansion outside of the UK also started in 2019 with a public beta in the US. Reports indicated that each of the beta events were completely sold out.
Monzo launched and shuttered Monzo Plus in 2019; Plus was a premium offering that wasn’t well received by customers but is expected to make a return in a new form. It offered benefits like 1.4% interest, exclusive card designs, and insurance packages.
Monzo business accounts were also launched as a beta in 2019 and remain in testing for now.
Revolut’s user data has always been difficult to parse, with global figures more often reported. At the beginning of 2019, they likely had ~3,000,000 global customers and ended the year with ~10,000,000 globally. Estimates put the UK at 3,000,000 of that global figure. Revolut also has 2,000 staff globally.
Revolut is live in over 30 countries globally and continues to have the most aggressive expansion plans. The US was its most notable launch, in partnership with Mastercard.
They also continued their aggressive product development; a key product launch was the ability to buy/sell stocks and shares commission free, competing with the likes of Robinhood and Freetrade. Additionally, they began testing their Open Banking integrations and Perks. Credit cards are expected to launch in early 2020 in partnership with Visa.
Revolut’s business accounts received a slight refresh, introducing zero-fee accounts to remain competitive with the market.
Starling reported 400,000 users at the beginning of 2019 and announced they had reached 1,000,000 last month. My estimates place Starling at a little under 1,000 employees.
Starling remains a UK-only bank but has begun the process of acquiring a full banking license from the Central Bank of Ireland. They did launch a Euro account to allow existing current account customers to spend in GBP or EUR.
Having won a £100 million grant from the Capability and Innovation Fund, Starling heavily pushed forward on their business current accounts throughout 2019 and integrated a number of partners to provide cashflow tools and lending options.
Like Revolut, N26’s user data is difficult to parse as it’s also globally available. The best estimates I have indicate they had ~2,300,000 at the start of 2019 and should soon reach 4,000,000 globally. N26 has ~1,500 employees globally.
N26 is now live in over 20 countries with a notable 2019 launch in the US and the first full year of the UK account.
N26’s biggest product launch was the re-branding of their premium accounts, now called N26 You. The focus of these is a high degree of personalisation, specifically around card design and reward offers.
Overall 2019 was a strong year for the Neobanks; each of them approximately doubled their user count and continued to expand internationally.
Barclays provided an interesting benchmark for user figures, stating they had 5,400,000 digital only users in August 2019. I’d expect both Monzo and Revolut to exceed that in the UK in 2020; Monzo already has the highest proportion of switchers with 13.12 joiners for every leaver (Starling is 8.95 and Barclays is -2.15, for comparison).
Their biggest challenges may come from the impact of Brexit, where I would expect the likes of Revolut and N26 to be more heavily exposed due to their already large EU user base and lack of UK-based banking license.
I expect 2020 to be the year that the incumbents begin to fight back more effectively. RBS’s Bó app and Virgin Money’s new current account were both launched in the last few weeks of 2019. Early reviews of these are mixed but there will be plenty of opportunities in 2020 for banks to begin acquiring smaller FinTechs who haven’t made it to profitability and iterating on the foundations they’ve built.