Special report
Bank survey, most types of fintech posted strong growth in the first half of 2020, with digital lending the only service to register a slump. Mastercard, for its part, has found that 62% of Europeans are interested in switching from physical banking to digital platforms.
“We are prioritising our investment spent across the bank on products and services that allow us to provide the best possible support for customers and colleagues.”
Alison Rose, RBS
There have been some individual success stories too. The advisory company deVere, which has launched a suite of financial apps, saw app usage rise by 72% across Europe in a single week at the end of March. Starling Bank became the first UK-based neobank to turn a profit, while ‘buy now, pay later’ group Klarna hit headlines with a valuation of $11bn.
“We are at a true inflection point in both retail and finance. The shift to online retail is now truly supercharged and there is a very tangible change in the behaviour of consumers,” explained Sebastian Siemiatkowski, CEO and co-founder of Klarna, in a previous interview.
A rollercoaster year However, the overall picture has actually been somewhat complicated given customers’ desire for security and the disruptions wrought by Covid. Consumer spending, a key revenue stream for neobanks, dropped sharply. And at a time when customers’ own financial situation is under strain, many may prefer to stick to stodgier but reassuring incumbents.
Monzo and Revolut both laid off staff, with Monzo warning at one stage that the pandemic was threatening its ability to operate. German neobank N26 has also cut its headcount, while RBS wound down its digital bank, Bo, just six months after launch. “We are prioritising our investment spent across the bank on products and services that allow us to provide the best possible support for customers and colleagues. This is more critical than ever given the challenges we are all facing at this time,” noted RBS CEO Alison Rose when the decision was taken. It isn’t really possible, then, to claim 2020 as a net good or bad for Europe’s neobanks. What we can say with more certainty is that it was a rollercoaster year, with many factors in the mix that affected each bank in different ways.
Challenger bank neon has gained more than 25,000 clients since the start of 2020.
Among the institutions that say they have done well out of the crisis is neon, a Swiss challenger that launched in 2019 (and another fan of lower-case names). A few months into the pandemic, the bank completed a €4.6m (£3.93m) financing round in parallel with strong customer growth. “It’s maybe weird to talk about the pandemic and start with the phrase ‘we had a good year’,” says Jörg Sandrock, CEO of neon. “But actually in 2020, we began with something like 30,000 clients after nine months on the market, and now we have more than 55,000 clients. We aim to have 125,000 by the end of 2021, and to be generating more revenue.” Sandrock thinks that while this growth had a lot to do with the product itself, the crisis probably helped – neon saw a high intake of new clients in April, for instance. He suspects that at this point in time, people had begun working from home and had the time to kill opening new bank accounts. “I think it’s a great advantage that fintechs have a higher degree of digitalisation in their offering – it makes them very attractive compared with the established banks,” Sandrock adds. “The funding side may be more difficult at the moment, due to the pandemic, but if you have a strong business model it might actually be easier than normal.”
12 Future Banking /
www.nsbanking.com
neon
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