Neobanked - 003 A maturing market

Neobanks are taking steps to solidify their capabilities and customer offer.

Throughout 2020 I’ll be publishing a newsletter called Neobanked. Issue 003 is below and you can subscribe here. Any initial thoughts or ideas are always welcome, get in touch!

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

Challenger Longevity Bank will go after the over 60s

Longevity Bank will launch sometime in 2020 in the UK and Switzerland. The only details released so far are that it will help those over 60 use digital banking services more easily. The company also plans to act as a third-party provider (TPP) to major banks.

Monese looking to raise £100m, valuing at over £1bn

Monese specifically targets customers who are underserved by traditional banks, such as those who have recently immigrated to the UK and therefore don’t have local credit histories. 3,000 people are joining Monese daily, across 31 countries in Europe.

Head of RBS’s Bó to leave

Sky News has learnt that Mark Bailie, chief executive of Bó, which launched last year, is expected to step down in the coming months. The app-based prepaid card has seen a slow start and Bailie was seen as a rival to RBS’s new CEO, Alison Rose.

Monzo names a new audit committee chair

Fiona McBain is to be a named as a non-executive director and chair of Monzo’s audit committee. Ms McBain also chairs the Scottish Mortgage Investment Trust, which has invested in the likes of Amazon and Facebook, and is a director of Dixons Carphone and Direct Line. release quarterly current account switching service (CASS) figures

Biggest net gainers of the quarter were Nationwide and Monzo, both gaining over 20,000 customers. NatWest and Halifax were the biggest net losers. Interestingly Triodos Bank, the ethical banking provider, was also a net gainer. 92% of CASS users also reported that they were satisfied by the service.

New and upcoming feature releases

Revolut launches a new savings account offering 1.35%

Metal customers, the £12.99 a month service, can now earn interest on linked savings accounts. There’s no minimum deposit amount, withdrawals can be made at any time, and interest is paid daily. Savings are deposited with Paragon Bank and protected by the FSCS up to a value of £85,000 for eligible customers. Additionally, only limited deposits will be accepted at the market-leading 1.35% rate. After the limit is reached, any new deposits will receive a lesser rate.

Monzo starts sharing information with credit agency Experian

Monzo is now reporting to Experian, as well as TransUnion. The only remaining UK agency is Equifax. Monzo will report on customers’ current account and borrowing history on a monthly basis.

HSBC designs quite possibly the worst cash transfer process ever

It’ll be hard for one of the other traditional banks to beat this. It’s not even clear what prompted the change.

Recent reports and studies

Financial Technology Partners release global challenger banking report

FT Partners takes a broad look across the global banking landscape, highlighting how we got to where we are and discussing regional trends.

App Annie’s State of Mobile 2020 report spotlights financial services globally

The report highlights the growth of fintech and app-based financial services globally, comparing monthly usage and downloads of banks and fintechs. Monzo comes out top for year-on-year growth.

The neobanks are maturing in both their product portfolio and their internal management capabilities. I expect this to continue through 2020 as we see established financial institutions ramp up their digital-only offerings. Customer acquisition will likely become more expensive and more difficult as a result; the neobanks’ word-of-mouth marketing model will be tested as competition intensifies.

Written on January 26, 2020