Neobanked - 005 Change for 2020

The UK market is starting to see who its winners and losers will be.

Throughout 2020 I’ll be publishing a newsletter called Neobanked. Issue 005 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

Starling raises £60m

Speaking with the FT, Anne Boden confirmed the funding will be used to accelerate Starling’s European expansion, via Ireland, and continue to grow their business offering on the back of the £100m grant they received from RBS.

N26 to leave the UK

N26 has decided to leave the UK following Brexit. The German bank hadn’t secured a UK banking licence and was previously authorised using an EU licence. The move will see them close ~200,000 customer accounts.

RBS’s Bó faces card issues

Bó asks 6,000 customers to destroy their cards because they were found to be in compliant with the EU’s strong customer authentication (SCA) rules. The news also implies the bank had gained 6,000 customers in the first month of launching, as only customers who signed up before January 6th were impacted.

Monzo’s premium tier to see a relaunch in 2020 and 500 more staff to join the company

The bank forecasts growth of 5.5m customers this year and predicts it’ll need 500 new hires to support this. The CEO also highlighted the potential relaunch of a premium current account offering in 2020 after closing Monzo Plus in 2019.

New and upcoming feature releases

Revolut launches Open Banking integrations

All customers can now connect their other UK bank accounts to Revolut, following a beta launch in late 2019. The integration allows customers to view transactions and balances of linked accounts.

Monzo upgrades its 3D Secure payment verification

The new standard, 3DS2, allows banks to use more information (e.g. previous merchant history) to determine if verification is required and opt out of the process entirely if the transaction is deemed low risk. The roll-out will make Monzo one of the few banks in the UK to support 3DS2.

Recent reports and studies

ARK Invest’s Big Ideas 2020 presentation

A wide ranging report on future trends, looking at topics like streaming media and DNA sequencing. Of interest to me was the section on digital wallets in the US and China.

The larger UK neobanks may have secured themselves some additional runway with the spate of funding news and rumours in early 2020. A common feeling in financial services is that they must demonstrate profitability in 2020 or face an acquisition. For now it seems they have very little to worry about from the incumbent banks from both acquisition and competition standpoints.

Written on February 23, 2020