Neobanks – Game changers, but do they really care about their customers?

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Neobanks, digital banks, challenger banks – I don’t want to get into the exact specification of how and why we classify Fintechs across this complicated taxonomy. Neobanks have gone from strength to strength in the last three years. Especially in Europe, progress has been phenomenal.

Revolut, Starling, Monzo, N26, Tide and the list goes on. But apart from a cool customer journey at onboarding, better digital banking experience, do they offer anything meaningful? Do they really care more about their customers than the traditional high street banks?

Based on the news release yesterday about Revolut launching in Australia, their customer base was set to surpass the 5 Million mark. Monzo hit 2 Million users and are growing at about 150,000 customer per month. Starling have a relatively modest customer base of 600000, and also have a reputation that their services were as good as Monzo if not better.

I think atleast some of them have grown to a scale where they can be considered as operational banks. Let us therefore quickly go through how they are doing across different aspects of digital banking.

Onboarding: This is perhaps what digital banks have all been amazing at. A few months ago, when I moved from an iPhone to an Android phone, it took me about a minute or two to move my Revolut account to the new phone. My Barclays app is still not completely set up on my new phone.

This is true if you looked at business banking accounts as well. I had to wait for weeks to get a Barclays or a HSBC business bank account, whereas opening a Tide business banking account was a breeze. This is nothing new about Neobanks – we always knew they were champions at the onboarding customer journey.

Product Offering: I have found Neobanks good at their core proposition. Revolut for example, had a phenomenal uptake for the FX card and the app they have with it. However, they have taken a narrow and a deep approach to their product offering. That’s a very startupish way of developing a proposition.

I think, it’s high time Neobanks started to cross-sell products to their clients. Their product suite has been shallow in comparison to mainstream banks. Interest rates on accounts have been lower, business bank account balances have been lower, and some of the more advanced multi-user functionalities a business bank account needs are still work in progress – and those are just a few examples in already existing products.

They have all been focusing on growth and it’s understandable why they haven’t got the breadth of product offerings. However, the execution of their core offering has been excellent. For example, the user experience on tagging and managing transactions is good on these platforms. However, integration with ATMs or services like Paypal have been missed out by some of these Neobanks.

Customer Service: This is perhaps one area that decides if Neobanks are really providing the service quality they claim. Revolut have been making headlines for several wrong reasons recently and have almost got the “Spoilt Child” tag amongst Neobanks. Monzo recently had a breakdown of systems and that caused some noise on social media. Complaints data give us a bit of a perspective of what customers feel.

With 5 Million customers Revolut had 171 FOS complaints registered

With 2 Million customers Monzo had 82 complaints registered

With 600,000 customers Starling bank had 51 complaints registered

I have seen some illogical comparisons between them and the high street banks based on the number of complaints. Some high street banks have 100,000s complaints registered with the Financial Ombudsman Service (FOS). But they also provide so many different product lines which the Neobanks don’t.

Therefore, it can’t be a like for like comparison. Comparisons could be at a product line level between a high street bank and a Neobank, however, I am not sure if that data is available.

With a simple AUM like calculation, Barclays at £1.13 Trillion AUM is 23 times bigger than Revolut that is £50+ Billion. Revolut’s 171 complaints feels pretty low even in that sense as 171*23 is ~4000 complaints. Although Revolut took some negative PR for its recent misadventures, the number of complaints per customer is not too different between them and the other top Neobanks.

Financial Inclusion: Let us look at some of the steps towards inclusion that the Neobanks have taken. 50% of UK bank branches have shut down in the past 30 years. However, Neobanks are creating new on the ground contacts to allow for more inclusion in a seamless way. Starling bank have partnered with Royal mail to accept cash from their customers. Monzo used paypoint in a similar manner creating over 30,000 points for customers to deposit cash.

They are also looking to be more inclusive from an age perspective. Less than 5% of Monzo’s customer base are over 60 years old, and that data can improve. Monzo, Revolut and Starling bank are all ramping up efforts to reach out to people of all age groups. This also makes commercial sense as people in their 60s generally are richer than people in their 20s.

As we can clearly see that, based on the data, Neobanks have just arrived. They have a long way to go before data can categorically drive conclusions on how well they have done (or not). With China’s Techfins piling money into the Neobanks of the west, may be it will not be long before we see Neobanks punching above their weight against high street competition.

Whether they compete with the mainstream banks is one question, but whether they will keep their culture of innovation and customer centred approach intact as they grow is yet another question.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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Monzo – London’s latest Unicorn sets sight on Global expansion

It doesn’t get bigger than Monzo and its CEO Tom Blomfield for London/UK Fintech. After grabbing headlines over the past 12 months, the end of 2018, saw Monzo achieve the status of a Fintech Unicorn.

Monzo went on Crowdcube (UK’s largest crowdfunding platform) for the funding round in 2018, when the raise of £10 Million closed in under 10 Minutes. As crazy as it sounds, and despite being sceptical about the valuation, part of me still likes to think that it was a well deserved milestone for Monzo.

The end of 2018 brought more luck to Monzo, especially to Tom Blomfield. He was awarded the prestigious OBE for his services to improving competition and driving inclusion in Financial Services. I don’t entirely agree with the financial inclusion angle, but hey, the leadership he has shown at Monzo makes him the poster child of Fintech in the UK.

“An OBE is a Queen’s honour given to an individual for a major local role in any activity such as business, charity or the public sector. OBE stands for Officer of the Most Excellent Order of the British Empire”

Monzo was founded in 2015 initially offering prepaid cards and moved on to a current account when they got a banking license in 2018. The Banking license meant that upto £85,000 of depositors money is insured by the UK’s Financial Services Compensation Scheme.

They saw tremendous growth in 2018, when they acquired ~1 Million users, but only 20% of them used Monzo as their Salaried account. The strategic direction that Monzo wants to take (to make money) would be in saving money for its customers (charge commissions), and creating financial dashboards for customers.

As they set sight on accelerating their growth at the back of their funding round in 2018, Tech Cruch recently reported that, they may be going for the US market next. Gone are the days when UK firms took a conservative approach of capturing Europe before going after the US market – which is generally considered a higher risk proposition, atleast by investors.

They have also ensured that corporate governance is taken care of as growth continues. On that note, they have managed to get Gary Hoffman as chairman. Gary is the former Barclays vice-chairman who steered Northern Rock through its emergency bailout during the financial crisis.

Amongst Neobanks in the UK, Revolut have certainly got the throne for the time being. But Monzo are in striking distance. So its onwards and upwards for Monzo and Tom. Well done and Happy New Year!!


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

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