Neobanked - 002 A busy start to 2020
It’s all go at the beginning of the year.
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.
News this week
RBS’s new digital-only personal account is being marketed through a number of online personalities in order to appeal to the same customer base as Monzo, Revolut, etc. Early reports of the launch indicated a large amount of fraudulent sign-ups and a relatively slow start. Until the app includes a more competitive feature set, I’d expect a continued slow growth.
Tandem’s credit card offering previously consisted of the Journey card (a credit builder) and the Cashback card (1% cash back on purchases). The Cashback card is now no more, replaced instead by a 0% interest subscription card, charging £5.99 a month. A number of customers have vocally announced they intend to leave the service once the cashback is finished.
Paul founded Monzo (originally Mondo) back in 2015 with Tom Blomfield, Jonas Huckestein, Jason Bates, and Gary Dolman. He’s now going to enjoy some time off and work on his alpaca farm with his wife.
The Telegraph reports that 200,000 Monzo customers are now taking advantage of the option to receive wages early, helping customers avoid missing upcoming payments which could ultimately damage their credit scores. They also warn that a number of companies now provide a very similar service for a fee, some of which charge as much as a 2.5% fee for early access.
The FT has a new report summarising data from mobile advertising technology company Ogury. Their summary is “Monzo, Revolut and the other fintechs have a long way to go before they can convince the public that they are worth ditching their traditional bank accounts for.” Most of this analysis is predicated on how exclusive the customer’s relationship is with their bank account, with traditional bank customers typically having only one account and Monzo, etc. customers have numerous accounts.
It would make sense that Monzo, Revolut, etc. users don’t bank exclusively with them - the customers are inherently switching from someone else, don’t have generations of inertia, and don’t offer a full suite of products. The traditional banks have all of this. And when opening a bank account is as simple as downloading an app, why would anyone bother closing old accounts or migrating DD/SO. It’s the very same reason we all use multiple social media apps.
Having witnessed my wife perform a CASS process recently (to Monzo no less) and require significant reassurance that it’ll work as promised, even the fintechs are unable to make the whole thing sound less daunting - easier to use both until a pain point causes more direct action.
The research also doesn’t seem to tackle primary banking directly (and unhelpfully the FT hasn’t provided a linked source for the data). It simply looks at usage of apps. I use Monzo, HSBC, and Tandem apps; I’m by no means exclusive but Monzo is my primary account and HSBC is only for emergencies (VISA credit card offers a useful back-up to Mastercard debit card).
New and upcoming feature releases
Chad West, Revolut’s CMO, announced a new app feature which can show users a map of all ATM machines in nearby, whether they charge a fee, and if the ATM is wheelchair accessible.
Recent reports and studies
To end this week I’d like to highlight an excellent report from Optima Consultancy that was refreshed in December 2019. It includes data from over 100 UK mobile banking and payments apps from more than 52 different providers across iOS and Android.
Two weeks into the year and we’ve already had some interesting announcements. As more traditional banks enter the digital banking arena fully, the neobanks will start to feel more pressure to demonstrate a resilient business model and their customer acquisition could become more difficult. For some, this may be the final year to prove their model works before the incumbents come knocking.