Neobanked - 026 A bumpy landing

2020 hasn’t been easy but the neobanks made it through, mostly unscathed.

Thanks for following Neobanked, a newsletter focused on the quickly evolving UK digital banking market. It’s been a rocky 2020 and I hope the 26 issues have provided you with insight into the neobank space.

I had always planned on running this newsletter for 26 issues, bi-weekly throughout the year. Reflecting on issue 001, this issue ends with a summary of the growth for each of the UK neobanks in 2020.

News this week

Monzo reaches 100,000 users across Plus and Premium tiers

Plus launched in July 2020 and Premium followed soon after. The bank recently topped 4.8m users; paying users therefore represent 2% of their customer base. This gives them a long term route to profitability but in a highly competitive sector of the market. Previous reports indicated Revolut had converted 5% of users to a paid tier.

Plum data suggests neobanks have made little impact

Plum, which connects to a user’s main bank account(s) found 91% of their customers use a traditional bank, rather than a neobank. Use of neobanks skews towards the 18-24 age group (13% penetration) with a significant way to go in the over-55s (5% penetration). Monzo was the most popular neobank and NatWest dominated in the traditional bank space.

Curve and Coinbase team up to support crypto spending

Curve users can link their Coinbase debit card to spend crypto-currencies on every day purchasing. Users can also get 1% cashback and mobile wallet support as a result.

New and upcoming feature releases

Revolut’s new Plus tier is a lower cost option for users

The £2.99 per month tier offers £1,000 insurance on purchases, extended refund / return protection up to 90 days, ticket cancellation insurance, and interest-bearing savings pots. The new service is expected to launch soon and users can customise their cards when it does.

Revolut adds four additional crypto-currencies

Users can now buy and sell EOS, OMG, 0x, and Tezos - some of the more popular alternative currencies. Additionally, Revolut will soon be improving the crypto trading fees in their app.

Curve’s Anti-Embarrassment Mode lets users set backup payment options

Designed to avoid “embarrassing” card declines, users can select their default choice for payments to fall back on.

Viewing bank balances on Curve

Curve has added further money management features, allowing users to link bank accounts (via Open Banking) and check their balance within the Curve app.

Recent reports and studies

Accenture survey finds 55% of UK consumers believe neobanks will fail in the next year

The figures come from a 3,000 person survey between July and August, showing a severe lack of trust in the neobanks. 20% had no trust at all, while 10% had “a lot of trust”.

The last 12 months have been challenging for all businesses but have caused a particular stress test of the neobank business model.

Monzo added ~1,300,000 users (4,800,000 total) and launched two paid-for tiers, hoping to relieve the impact the lockdown on transactional revenues. Business accounts also had a strong 2020 but international expansion hopes were stymied - a limited beta is available in the US and has had a rather muted launch.

Revolut added more than 2,000,000 globally (12,000,000 total) in 2020 with aggressive product development to expand the completeness of their proposition. Their financial super-app continues to be the broadest of the neobanks and helped them generate significant revenues throughout the year.

Starling grew near 100%, from 1,000,000 users in Dec 2019 to ~1,800,000 at the end of 2020. Their slow and steady European expansion continued with business accounts bolstering their profitability.

N26 bowed out of the UK, blaming Brexit challenges, and no other significant neobank appeared. Start-ups like Sync launched with little impact to date whilst adjacent firms like Plum and Curve grew their user base and expanded their underlying money management features.

Likewise, the traditional banks faced challenges with their digital-first offerings. RBS’s Bó closed shortly after launch and rumours continue to grow around Goldman’s UK Marcus current account launch. The pressure of the pandemic may give a unique opportunity for traditional banks to pick up a fintech or two in 2021.

Written on December 20, 2020