Neobanked - 006 A canopy of neobanks
Scale is becoming a key feature of the best neobanks, both in terms of capital and user growth.
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
Their recent fundraising values them at $5.5bn, making them one of the most valuable FinTech globally. The funding will be used to continue their aggressive global growth, expand the customer offering to include lending and credit, and achieve profitability in 2020.
After hitting 3m customers in Sept 2019, the neobank has gained a further 1m customers in 6 months. It previously took Monzo 5 months to grow from 2m customers to 3m. Further growth is expected from its US launch once the beta is completed.
New and upcoming feature releases
NatWest’s digital bank, Bó, has a strong and opinionated app design. I demonstrate its customer onboarding experience in this video.
Monzo will soon show customers their credit scores in the app using data from TransUnion. It will roll out in waves to all customers over the next few months.
The more I think about the fintech and neobank ecosystem, the more I feel it will result in a rainforest-like ecosystem; there will be a proliferation of small shrubs (fintechs) on the forest floor that fill the gaps and cracks left by the large canopy trees (neobanks). Revolut and Monzo are now getting to such a scale that I can feel confident betting they’ll feature as part of the canopy. We’ll have to wait and see who breaks out to become the emergent layer.
Additionally some of these shrubs may start as newly built products but they may ultimately find themselves subsumed by the trees as features - credit scores are an early example of this.