Table of Contents

04 61 118
Introduction Emerging Battlegrounds Counter Maneuver by
• The Rise of Neobanks for Neobanks Traditional Banks
• Brazil • Digital-Only Initiatives by Traditional
• India Incumbents
• Mexico • Global Analysis of Incumbent Banks’
•
08
United States Standalone Mobile-First Offerings
• Australia • List of Digital-Only Initiatives by Banks
• Where Banks Have the Edge
• Case Study: JP Morgan – Failure of
The Era of Digital Banking Finn
• Characteristics of Neobanks • Stakeholder in Neobanks – Is It the
•
•
•
List of Neobanks
Growth of Neobanks Over the Years
Funding Analysis
67 Right Way?

• Top 15 Funded Neobanks List of Independent

Neobanks
122
List of Digital-Only
Initiatives by Incumbents
21 76
Technology/ Prominent Global
Core Banking Solution
• Core Banking Solutions Used by
Neobanks: A Deep Dive
• Snapshot of Leading Neobanks
132
Neobanks • Evaluation Metrics: Competitive Conclusion
• Neobanks Leveraging Open Banking Analysis
A) Incumbent Banks
• Case Study • Case Study
• Incumbent Banks Tackling the
Threats Posed by Neobanks
• Why Banks Have the Edge
B) Independent Neobanks
• Grown-Up FinTechs Are Turning Into

31 107 Banks: The Great Rebundling Has

Begun
• Why Customer Acquisition Is More
Exploring Growth Via Segmented Analysis of Important and Can Provide a Winning
Edge but Profitability Is Also Important
Partnerships Leading Global • Now That They Have Established
• Partnership Continuum (Infographic) Neobanks Themselves, What’s Next?
• Neobank-Incumbent Bank • Neobanks: Weathering the COVID-19
• Competitive Analysis of Prominent Storm
Partnership
Neobanking Players
• Neobank-FinTech Partnership

35 109 143
Neobanking Globally: Neobanks Serving the Future Outlook
Region-Wise Analysis Underserved Economy
• Value Addition by Neobanking Players
• Region-Wise Analysis in Underserved Customer Segments
• Geographies – Deep Dive • Case Study
Research Methodology

The Neobanking 2.0 Report is a comprehensive study based on MEDICI’s proprietary FinTech data of over
13,000 startups, deep market intelligence derived from years of tracking the FinTech industry, and
secondary research which was refined through brain-storming sessions & in-depth interviews with
segment experts to extract valuable market signals from the noise, identify market trends, and develop
point-of-views in the report.

MEDICI has an abundant volume of information in both quantitative and qualitative forms, curated
through our industry analysis and market engagement initiatives. In the secondary research process, we
conducted an in-depth study of the Global FinTech landscape, understanding the key stakeholders,
drivers, trends, challenges, and opportunities. Primary research formed the most crucial source of
information gathering for this study. It complemented the secondary research with insights from the
neobanking industry.

Over 50 interviews in the span of three months were conducted with industry experts to gain the most
updated and valuable insights on segments covered in the report. The qualitative & quantitative findings
and insights from these research stages were curated by MEDICI analysts to present a comprehensive
view of the Global Neobanking landscape. These were further refined through MEDICI experts’ segment
and ecosystem insights that have been developed through years of intensely tracking the developments
and bringing together the ecosystem.

3
Introduction

4
Introduction
Just like how the quantum theory questioned acting as an impediment to fast innovation, and
stereotypical notions of physics and challenged the demand from customers for a
common ideas around concepts of reality, Google/Facebook-like simplicity in banking
neobanks are doing something similar to the experience led to the creation of an entrepreneur-
banking industry. Digital banking is no longer a led banking product revolution through the rise of
theory; in fact, it has evolved to become part of neobank players.
our everyday lives. When Cashplus, the first
neobank, started in 2005, they didn’t know that
Neobanks: How is their service offering
they would later be classified/termed as a
neobank. They had started from prepaid card different from traditional banks?
offerings but moved to offer instant approval Neobanks offer services such as creating and
digital current accounts for consumers and operating a savings account, payment of bills or
SMEs, foreign currency cards, and business and money transfers, loans to individuals and
employee expense solutions. For 12 years, businesses, and other such services directly
Cashplus operated without a banking license; it on their mobile phone or via any other digital
finally applied for one in 2017. Fidor, Simple, N26, platform. Neobanks offer innovative features,
Revolut, Monzo, etc., are some of the better- process simplifications, and offerings that are
known names in the neobanking history. different from traditional banks, including fast
Neobanks offer services such as creating and account opening, free debit cards, instant
operating a savings account, payment of bills or payments, cryptocurrencies, lower costs, mobile
money transfers, loans to individuals and deposits, P2P payments, mobile budgeting tools,
businesses, and other such services directly on user-friendly interfaces, etc. Here are some of the
their mobile phone or via any other digital top innovations happening in this space below:
platform. Unlike various traditional banks, these • Digital Onboarding/Account Opening:
banks do not have any physical branches. These Neobanks offer simple and fast online account
companies target largely younger generations opening compared to traditional banks.
who are willing to accept a bank that has no • International Payments/ Remittances:
physical presence. Neobanks offer the usage of their debit card in
foreign countries for no fees and at live
Rise of Neobanks: exchange rates.
• Money Tracking/Account Aggregation:
After the financial crisis of 2008–09, the banking
Neobanks can simplify money tracking and
sector, especially in the developed markets,
account aggregation.
suffered a heavy loss of trust and is undergoing
• Lending/Credit Products: Neobanks can
incremental reform ever since. Legacy technology
provide credit products at lower charges and
systems and processes remain, to this day, a
interest rates compared to traditional banks.
constant for most banks globally, and it would
seem that they remain hesitant to embrace Unlike various traditional banks, these banks do
change. High penalties of non-compliance, not have any physical branches. These
competition from tech giants penetrating the companies target largely younger generations
financial services market, the pressure of running who are willing to accept a bank that has no
physical branches in a digital era, and challenges physical presence. The main drivers for the
surrounding consumer engagement have further growth of these players varies in developed and
put more pressure on the incumbent banks. developing economies. In developed markets like
Simultaneously, traditional banks have been European countries, Australia, etc. it's mostly
increasingly competing with FinTech players, because the large banks have not been able to
among others, which are young, dynamic, and deliver products and services up to customer
more adept at providing financial services in expectations, cases of misselling, a virtual
today’s digital era. monopoly in most of the developed markets.
Lower interest rates, a legacy banking culture
5
Introduction
There has been a rising expectation among the for OTT neobanks. E.g., in lending, the credit
consumers for better products and services and risk is borne by the partner banks.
consumer experience. For instance, the
Australian banking landscape has been 3. Apart from these pureplay neobanks, there
dominated by the Big four i.e., Commonwealth are digital-only initiatives by banks, such as
Bank of Australia, Westpac Banking Corporation, digibank (by DBS) or Marcus by Goldman
Australia, and New Zealand Banking Group, and Sachs. These are stand-alone, digital-only
National Australia Bank. But with poor consumer banks created by traditional banks; they use
experience and increased scandals from these cutting edge technology and innovative
banks, neobanks like Xinja, Volt, and 86,400 have digital-centric products & services to service
been on the rise. They are able to attract millions customers. These digital banks mostly use
of customers with superior customer experience completely new technology platforms,
and product offerings. In emerging markets like thereby reducing dependencies on their
India and Brazil, the factors are different. There is parents’ legacy technology platforms and
a vast potential to scale and provide banking in a increasing agility and responsiveness in go-
digital-first fashion. A significant portion of the to-market
population are either unbanked or are looking for
Emergence of Neobanks:
alternatives from the traditional banks.
Globally, the leading success factor for the
Ways to Set Up Neobanks: growth of major neobanks seems to be superior
The neobanking landscape is an amalgamation of customer experience compared to the incumbent
non-licensed, over-the-top banks, digital players. These players have been hyper-focused
initiatives of traditional banks, and licensed on personalization. As the digital bar continues to
neobanks. be raised, the successful ones are meeting the
customer where they are and are finding ways to
1. One of the way to set up this banks is to
connect advice, banking, and investing in one
obtain a virtual banking license from the
experience. With redesigned mobile and web
government and start full-fledged banking
applications and smooth customer onboarding,
services on a mobile app or via any other
players like Monzo, Atom, and Starling Bank have
digital touchpoints without any physical
grown significantly. By eliminating costs
branches. Examples of the same are Fidor, a
associated with physical branch maintenance,
German bank founded in 2009, which has
neobanks are able to reduce the fees associated
been operating as a neobank in the UK since
with key products (e.g., Revolut with their FX
2015, or Revolut and Monzo that were
card).
founded in 2015 in the UK. However, not
many countries have defined their virtual
Neobanks are able to focus on creating a flowing
banking policy, which means there has to be
and unique user experience and develop forward-
another way to do it.
thinking in-app features. Recently, a Revolut
customer took to Twitter sharing his experience
2. The second model comprises of these
on how there was suspicious activity on his card
companies partnering with existing banks
and how he was able to cancel the old card and
and providing customer relationship
order a new one with no extra fees; his money was
services. They offer better user experience
safe and accessible in just a few clicks on the
and develop various tools that can make the
mobile app. Neobanks is viewed as a direct
onboarding and transactional experience
challenge to the status quo of the established
simpler for customers. As these companies
traditional banks, with its lower cost structure and
work on a partnership model, the obligation
hyper-personal customer experience.
to follow the regulatory requirements is on
their partner banks. This is a risk-light model

6
Introduction
Unlike their traditional counterparts, neobanks added over 6 million new customers bringing the
aren’t burdened by ancient legacy systems, total number of global customers to 19.6 million
complicated organizational structures, and heavy in the second half of 2019 from 7.7 million
regulatory requirements. As wonderful as it customers in 2018 accounting to a staggering
sounds with all the advantages and features growth rate of 150% outpacing the 1% growth
compared to traditional banking, neobanks face a rate of incumbent banks. With a huge consumer
fair share of difficulties in the market acceptance base, these banks are still facing a challenge in
of its products. Instead of going head-on with terms of long-term profitability. Even with their
traditional banks, most neobanks enter the large consumer base, these banks witnessed a
market by focusing and targeting niche customer sharp decline of 25% in their average deposit
segments, specifically millennials who are likely to balance from £350 to £260 per customer in 2019.
be keen on the gig economy and tech-savvy. The This sharp decline can be attributed to the fact
flexible and inclusive nature of neobanks also that customers still prefer incumbent banks for
enables them to capture the unbanked their savings and monthly salary deposits.
population, SMEs, and thin-file customers who Neobanks need to devise strategies to convert
are often overlooked by the current traditional their cost-to-serve advantages and rapid user
banking business. There are over 1.7 billion acquisition rate to profitability.
people across the globe who are outside the
ambit of formal banking. While governments take What Lies Ahead for these banks?
their own sweet time to make financial inclusion a Even with their edge over traditional players like
reality, technology has embraced everyone. immense popularity and a huge consumer base,
Neobanking is part of this reality, which is making these digital-only banks may find it challenging to
financial services accessible to everyone. differentiate themselves from the traditional
banks as these traditional banks have also started
Customer Acquisition or Profitability? to target the same customer segment either by
Neobanks around the globe have been working investments, partnerships, or by launching their
hard to increase its market share in the banking own digital initiatives. Consumer trust is also
industry. In Europe, we have witnessed these going to be a significant deciding factor in driving
digital-only banks scaling their customer base at success for these players. With banking failures
an unprecedented rate and taking a big portion happening all around the globe, consumers will
out of the traditional banks’ market share. This find it difficult to move their accounts to
trend is clearly evident in the European regions, unregulated entities that are relatively new in the
where UK neobanks have added almost 20 million market, as compared to the century-old financial
customers. A 2019 report by AT Kearney found institutions. So it largely depends on the level of
that European neobanks gained more than 15 trust that these neobanks will be able to develop
million customers between 2011 and 2019; by with the consumers directly in their target
2023, neobanks are projected to have up to 85 markets.
million customers over the age of 14, which is The bright spot is that they can grow fast because
equivalent to 20% of Europe’s population. most of the neobanks will try to grow inorganically
However, we have witnessed an inverse relation through collaborations and partnerships. They
were larger the consumers, more the losses these can be a lot more agile in comparison with
banks are incurring. So even with a large traditional players because they can quickly
consumer base, why are these players not making integrate third party products and services and
money? roll out that as a white-labeled offering to their
consumers. Going forward, we could witness
Even with their increased popularity over recent some level of consolidation after a few years with
years, profitability has been a huge challenge for too many players coming in; there could be M&A
these neobanks. According to an Accenture kicking in where some of them might merge or
report, neobanks operating in the UK alone have get acquired by banks to obtain their huge
consumers or platforms. 7
The Era of Digital
Banking
• Characteristics of Neobanks
• List of Neobanks
• Growth of Neobanks Over the Years
• Funding Analysis
• Top 15 Funded Neobanks

8
Characteristics of Digital-Only Banks

The challenger banking landscape is an amalgamation

of non-licensed over the top banks, digital initiatives of
traditional banks, marketplaces, and licensed
challenger banks.

Licensed Banks

These are digital-only banks which have obtained a fully operational banking license.
This enables them to offer products and services on their own, rather than through
licensed banks. It also enables them to have an improved core banking platform that
allows for smoother integration with external service providers they may choose to tie up
with. Cost of customer acquisition is comparatively much lower as they acquire
customers only through digital channels. With no legacy infrastructure issues and agile
core banking platform, the cost of a product launch is cheaper and time to market is
faster. Some of these banks may still continue to offer services in partnerships with
banks and other FinTech companies. They may also continue to operate as
marketplaces.

Banks’ Digital Initiatives

These are stand-alone, mobile-only banks created by traditional banks; they use new-age
technology to deliver products and services in a customer-friendly manner. These digital banks use
different technology platforms compared to their parent banks, thereby fast-tracking the
overcoming of hurdles associated with legacy architecture. They are targeted at the tech-savvy,
millennial customer segment, as well as to provide best-in-class innovative banking services.

Over The Top

These are digital-only platforms that don’t have their own banking licenses. These
platforms offer either a stand-alone product or a bouquet of financial products in
partnerships with financial institutions/banks and FinTech firms but at a cost quite lower
than traditional banks. Some of them act as marketplaces for financial products. They
often take the API route to connect their customers to services provided by various
players. These players usually differentiate themselves by offering unique features/VAS
to their customers.

9
Characteristics of Digital-Only Banks

These are mobile/digital-first platforms that offer banking these digital-only banks start by offering different services
services like checking & savings accounts, debit cards, from the financial value chain like a debit card and some
etc., to consumers without the backing of the brick-and- form of savings account/remittances/P2P payments, etc.,
mortar branches of traditional banks. Neo/digital banks to acquire new customers. Upon successful customer
usually include facilities like mobile deposits, P2P acquisition, these banks may go on to acquire a banking
payments, mobile budgeting tools, real-time digital license to enable them to offer products and services on
receipts, etc. These platforms usually work in partnerships their own. Some of these platforms are stand-alone
with traditional banks to leverage their banking licenses to banking platforms offered by traditional banks.
be able to provide regulated banking services. Some of

Neobank Operating Model

10
 Digital-Only Banks Increasing
Customer Base

(Chart not to scale)

20 -

10 -
Number of Customer (Mn)

4-

3-

2-

1-

0-
2011 2012 2013 2014 2015 2016 2017 2018

Founding Year

Licensed Banks Over The Top Bank’s Digital Initiatives

11
Independent Neobanks

This section of the report discusses independent

neobanks, i.e., Licensed Banks and Over The Top.

Licensed Banks

These are digital-only banks which have obtained a fully operational banking license.
This enables them to offer products and services on their own, rather than through
licensed banks. It also enables them to have an improved core banking platform that
allows for smoother integration with external service providers they may choose to tie up
with. Cost of customer acquisition is comparatively much lower as they acquire
customers only through digital channels. With no legacy infrastructure issues and agile
core banking platform, the cost of a product launch is cheaper and time to market is
faster. Some of these banks may still continue to offer services in partnerships with
banks and other FinTech companies. They may also continue to operate as
marketplaces.

Over The Top

These are digital-only platforms that don’t have their own banking licenses. These
platforms offer either a stand-alone product or a bouquet of financial products in
partnerships with financial institutions/banks and FinTech firms but at a cost quite lower
than traditional banks. Some of them act as marketplaces for financial products. They
often take the API route to connect their customers to services provided by various
players. These players usually differentiate themselves by offering unique features/VAS
to their customers.

Digital-Only Initiatives

These are stand-alone, mobile-only banks created by traditional banks; they use new-
age technology to deliver products and services in a customer-friendly manner. These
digital banks use completely different technology platforms compared to their parent
banks, thereby fast-tracking the overcoming of hurdles associated with legacy
architecture. They are targeted at the tech-savvy, millennial customer segment, as well
as to provide best-in-class innovative banking services.

12
New Opportunities in a Digital
Landscape: The Rise of Neobanks
Gained Momentum Quickly
Since the financial crisis of 2008-09, the banking sector, especially in the developed markets, suffered a heavy
loss of trust and is undergoing incremental reform ever since. Lower interest rates, a banking culture acting as
an impediment to fast innovation, and the demand from customers for a Google/Facebook-like simplicity in
banking experience led to the creation of an entrepreneur-led banking product revolution. Fast-forward to
2016 – a new breed of technology-driven and customer-centric financial institutions, aptly named neobanks,
are bidding to transform the banking landscape as we know it.

When it comes to neobanks, it’s important to note that they are

often faster with respect to integrating new processes and/or
products into their existing platforms and can help customers
connect in an easier manner with third-party products which,
ultimately, benefits the end user. It also helps that many
neobanks – most of them, in fact – don’t tend to have physical
branches, only keeping them for certain products and customer
segments that require physical transactions. Instead, their
services are online and mobile-enabled. What sets them apart is
that, in many cases, these banks focus on underserved segments
in SME/retail. This helps them acquire customers on a larger
scale, thanks to the improved UX they offer.

How is the service offering different from traditional banks?

Neobanks offer innovative features and offerings that are different from traditional banks, including fast
account opening, free debit card, instant payments, cryptocurrencies, lower costs, mobile deposits, P2P
payments, mobile budgeting tools, user-friendly interfaces, etc. We have discussed some of the top
innovations happening in this space below:

Digital Onboarding/Account Opening: Neobanks offer simple and fast online account
opening compared to traditional banks. E.g., joint account opening by Starling Bank.
Starling Bank introduced joint accounts for retail customers. Using Google Nearby technology, Starling
customers can apply to open a joint account by just sitting next to each other. The technology uses a
combination of Bluetooth and Wi-Fi to find the other device so that they can confirm the connection.
Customers need to tap the “find your other half” prompt within the app to open the joint account. It is available
to any two existing Starling personal account customers. Each account holder can order their own card, and
both account holders will receive notifications for all transactions made on the joint account. It also lets account
holders set up a common goal. In the event of discord or a relationship breakup, account holders can
unilaterally lock it up and shut down the account by contacting Starling directly.

13
New Opportunities in a Digital
Landscape: The Rise of Neobanks

Starling Bank has

introduced joint accounts
for retail customers. Also
launched the connected
card, a secondary card that
can be linked by a
customer to their account
for making payments for
essentials like groceries.

International Payments/Remittances: Neobanks offer the usage of their debit card in foreign countries for no fees and
at live exchange rates. E.g., Revolut enables consumers to hold, exchange, and transfer up to 25 currencies via the Revolut
app for no fees.

Users can open free EUR and GBP accounts in three

minutes. It allows its users to lock-in exchange rates in
real time via the app. Consumers can also set up a free
multi-currency recurring payment system on-the-go
for rent, bills, and more, in 25 currencies.

A user can transfer money to bank accounts in over

120 countries for free. Also, the company provides
the Revolut card, which supports card payments and
ATM withdrawals in over 140 currencies. It lets users
transfer money to other accounts via SMS, email,
WhatsApp, and social media. Users can also buy, hold,
and exchange cryptocurrency (Bitcoin, Ether, etc.) with
25 fiat currencies. While transferring money,
traditional banks, and other forex providers either
mark up the exchange rate or charge high fees for
transfers. They earn through the difference between
the interbank exchange rate and the rates they offer.
However, Revolut uses the interbank exchange rate
(no markups) and does not charge any fees for a
standard transfer. If a user needs to send money
faster, a small amount is charged.

14
New Opportunities in a Digital
Landscape: The Rise of Neobanks
Money Tracking/Account Aggregation: Neobanks can simplify money tracking and
account aggregation. E.g., Tandem is a money management app that helps users to
spend, save, and manage money.

Tandem is a money management app that helps users to spend, save, and manage their money. Tandem
uses AI, which flags rising bills, duplicate payments, and other user expenditure like refunds. Although it has its
own banking license (acquired through the acquisition of Harrods Bank), it allows users to connect all of their
bank accounts (including Tandem accounts) to a single app that shows how much the user can spend each
month. It also helps in finding better deals (such as switching energy suppliers & more).

In addition, it offers a 0.5% cashback credit card product and a fixed saver account. Tracking and
managing money from multiple bank accounts is a cumbersome process. Users have to perform tracking
manually, find out about any discrepancies, etc., which is a time-consuming and inefficient process. It’s hard
for users to know where their money is being spent and saved. With innovative money-saving products, real-
time alerts, notifications, and suggestions, users are able to manage their money more efficiently. With PSD2
and Open Banking, Tandem can leverage its account aggregation capability to help users find the various
financial products and offer seamless end-to-end services.

15
New Opportunities in a Digital
Landscape: The Rise of Neobanks
Lending/Credit Products: Neobanks can provide credit products at lower charges and
interest rates compared to traditional banks. E.g., Nubank (Brazil) does not charge fees
for its credit card usage.

Nubank provides credit cards to Brazilians. It lets users lock & unlock cards, ask for a limit increase, and
change the due date from the app. Nubank makes money in two ways: 1. Customer transactions;
2. Financing a part of or the total amount of consumer invoices. Nubank relies on public databases to
collect data (thousands of variables related to consumption history, payments, social connect, etc.) and group
customers into hundreds of different profiles. Each profile is classified into one of the three groups to screen
out unqualified customers. The qualified customers are then invited (depending on group type, the time period
varies from one week to 90 days). It does not charge any fee as long as customers clear their dues on time
(also, no upfront or service charge as many others do in Brazil). In addition to credit cards, it also offers current
account (NuConta) services and a rewards program.

16
Growth of Neobanks Over the Years

Neobanking startups have been growing steadily over the last few years.

Startup activity in Around 50% of the Before 2010, there However, in the last
this space started startups were were 9 such four years, the
around 2004 and founded in 2016 and startups; by 2015, number of neobanks
gathered pace 2017. the number rose to established has
after 2011. 43. increased to 103.

17
Neobank Funding Analysis 2020

The neobanks registered record-breaking funding in Q3 2019, where they raised a total
of $1.74 billion over 21 VC/PE deals. Since 2018, a total of $5.627 billion has been
pumped into neobanks, with a record-breaking $4.361 billion of investments in 2019
alone. However, due to the current ongoing COVID19 pandemic, the VC/PE funding in
this segment has taken a big hit. In Q1 2020, the total funding amount to $1.304 billion
over 24 VC/PE deals.

Top Five Funding Deals in 2020

Revolut (Series D, $500M) Tandem (Corporate Round, $78.4M)

Qonto (Series C, $115M) Starling Bank (Venture-Series, $77.49M)
Xinja (Series D, $95.5M)

18
15 Most Funded Neobanks Since Inception

An analysis of the 15 most-funded startups shows that 11 of them are from Europe and 3 from the Americas.
• The top 7 most funded startups are unicorns. The highest amount of funding was received by Nu Bank ($1100 million)
from Brazil, followed by OakNorth from the UK ($1,000 million), N26 from Germany ($682.2 million), and Atom Bank
($506.1 million).
• The Asian startups which have raised the most amount of funding are are Open ($35 million), and Neat ($5 million).
• Judo Bank ($369.4 million) is the most funded startup from the Oceania region.
• After 2017, banks such as Atom Bank, Monzo, N26, NuBank, Oak North, and Revolut have been raising huge amounts of
funding.

19
Neobank Unicorns

$1.4 Bn
in 2019
$2.5 Bn
$2.8 Bn
in 2019
$1.0 Bn
in 2019 in 2019

$3.5 Bn
in 2019

$21 Bn
in 2018
$5.5 Bn
in 2020

$5.8 Bn
in 2019
$10 Bn
in 2019

20
Technology/Core
Banking Solution
• Core Banking Solutions Used by Neobanks
• Neobanks Leveraging Open Banking
• Case Study: Fidor Bank

21
New Age Core Banking Solutions for
Neobanks
Over the years, legacy systems or Core Banking Solutions (CBS) have undergone cycles of
change, to meet a wide range of requirements. This has presented financial institutions
with multiple challenges with respect to updating their existing systems. For instance,
‘knowledge transfer,’ ‘undocumented logic,’ ‘technical debt,’ and a ‘skills/desire gap’ are
among the factors that come as obstacles to making CBS more versatile. It’s not just a
matter of knowing how to do this; CBS comes with a great degree of complexity, and as a
consequence, changing over to newer, better systems isn’t a very simple task, which is why
banks aren’t often keen on getting this done. Today’s systems are more modular,
componentized, and, therefore, adaptive and agile to the fast pace of changes demanded
by the digital world. Investments are being made by most banks to move into a
microservices-driven architecture supplemented by the power of the cloud. This is in sharp
contrast to legacy monolithic architectures, where changing one part of the larger system
could have an adverse impact on other parts. This, in turn, necessitates lengthy impact
assessments and testing, which would incur significant expense. The bottom line is,
switching over to agile systems is far from easy and risk-laden for incumbent financial
institutions that already house millions of customers. Core banking solutions (CBS) has
been one of the major reasons for impeding a bank’s digital transformation journey. As
described by Citi bank, legacy system has proven to be an Achilles heel for the traditional
incumbents in their digital transformation journey.

However, one of the real differentiators for the challenger banks has been their agile core
banking system as compared to traditional incumbent banks. Its systems are more agile
and, in some instances, modular as well. This is in sharp contrast to the monolithic
architecture of CBS of banks – where changing one part of the larger system could have an
adverse effect on other parts.

1. Built their own in-house platform

In order to have an 2. Partnership with traditional tech players

agile core banking like

system, neobanks
have primarily 3. Leveraging new age core banking
opted to: solutions like

22
Benefits of New Age Core Banking
Solutions

NEOBANK
01 05

Purpose-built for Best practices

digital enterprises
Designed and built 02 04 Global best
practices in
from the ground up
for digital products 03 products and
processes usually
and processes for
available as a
consumer and
model bank to
business banking.
accelerate
Highly agile and Open API- rollouts.
scalable enabled
Cloud-native design innovation
based on micro Designed for
services that lend collaboration with
modularity and the ecosystem by
agility; configurable means of an open
business Data at the architecture
capabilities and center of the enabled by Rest
technical design architecture APIs; designed to
allow for better Product and process facilitate inorganic
scalability. design are facilitated growth through
by insights from data partnerships.
at a granular level;
architected for data
access and analytics
to be real time.
23
Core Banking Providers List for
Prominent Neobanks

Core Banking Solutions Neobanks

Developed its own in-house

platform

• Among modern core systems, Mambu has been the most popular choice for challenger banks with the likes of
N26, OakNorth, and ABN New10, choosing it over in-house builds. Atom Bank in the UK switched over from FIS
Profile, a traditional system, to Thought Machine, which is another new-age core platform.

• The most successful company from the traditional core system pack for challenger banks has been Temenos with
its Transact platform (earlier known as T24). Xinja, Volt, and Judo in Australia; Varo Money, and Grasshopper
Bank in the US; and Praxia Bank in Greece and Alba Bank in the UK (under license application) are some of them.
The recent TCS announcement of partnering with the first digital bank in Israel and Fiserv powering Tandem Bank
in the UK has added to this mix.

• However, the over-the-top neobanks have preferred to build it themselves instead of choosing an off-the-
shelf core solution. This is because such brands typically focus on customer experience and value-added
services, whereas the heavy lifting of maintaining the ledger, compliance, risk, payments, and reporting is done
through their partner banks.

24
Modern Course of Choice of Popular
Neobanks

HEADQUARTERS
Dublin, Ireland
FOUNDING YEAR
2014 $ FUNDING
NA

Leveris is a software company providing the banking-as-a-platform solution for challenger banks, traditional banks,
new market entrants, and other consumer brands who wants to enter the banking and lending space. The company
offers two integrated products such as a full suite of an end-to-end digital retail bank and full spectrum lending
solution. It is a fully integrated, back-end, middleware and front-end services and applications platform that is built
on open-source components.

HEADQUARTERS
London, United Kingdom
FOUNDING YEAR
2014 $ FUNDING
$22.24 Million

Thought Machine provides turnkey software solution that can be used by the bank to avail the banking services. It
holds facilities like banking operations, API Integration, workflow, customer data management services in its
Software.

HEADQUARTERS
Berlin, Germany
FOUNDING YEAR
2011 $ FUNDING
$46.40 Million

Mambu enables banking providers to create, launch and service loan and deposit products through its cloud
banking platform. Mambu accelerates time to market for new consumer and SME banking products via innovative
channels.

25
Modern Course of Choice of Popular
Neobanks

HEADQUARTERS
Geneva, Switzerland
FOUNDING YEAR
1993 $ FUNDING
NA

Temenos Group provides banking software systems to retail, corporate, universal, private, Islamic, microfinance
and community banks, wealth managers, and financial institutions. It provides the integrated banking and finance
software solutions, analytics risk and compliance solutions.

HEADQUARTERS
California, United States
FOUNDING YEAR
2016 $ FUNDING
NA

Mbanq offers full back-office functionality including finance, treasury, regulatory reporting, risk management, and
AML. Mbanq includes white-label mobile and web banking apps with a modern, digital experience.

HEADQUARTERS
London, United Kingdom
FOUNDING YEAR
2016 $ FUNDING
£49 Million

The company provides an API banking platform for banks and businesses, enabling them to avail open portal for
their financial processes. It is based on based on data analytics and artificial intelligence technology.

26
Neobanks Leveraging Open Banking

• Open Banking enables the neobanks to adopt a customer-first transformation approach. With the help of Open
Banking, neo banks can fast-track development by combining services from multiple third-party providers.

• We have seen a huge uptick in neobanks that leverage open banking technologies to meet certain limitations in
terms of products and services. However, these players are able to use this technology to their advantage and fill
the gap by partnering with other FinTech players. This further provides them to quickly executive their plans and roll
out innovative products in a competitive environment.

Mobile

Consumer

AISP/PISP

……………………………………………..
API 1 API 2 API n

……………………………………………..
Bank 1 Bank 2 Bank n

27
 Neobanks Leveraging Open Banking

• One of the major reasons why there was a huge upsurge in neobanks in the UK is the Open Banking Initiative and
PSD2 mandate that went live in 2018. This has helped the digital banks like Revolut, Starling Bank, N26 to establish
themselves and give a tough fight to the existing traditional incumbents in the European region.
• Furthermore, in geographies likes Australia, China, or Hong Kong, we have seen increased adoption of Open
Banking, which has helped neobanks thrive by leveraging these initiatives.
• However, neobanks in countries like the USA have not been able to scale themselves as compared to their counterparts
in other geographies. One of the primary reasons can be attributed to the USA’s reluctance towards Open Banking.

Open Banking Beyond Europe

CANADA UNITED STATES BRAZIL
• Canada’s Department of Finance • The USA has been reluctant in embracing • The Central Bank of Brazil wants to
launched an advisory committee on Open the PSD2 framework adopted by the encourage positive competition via
Banking in September 2018. United Kingdom and the European Union. Open Banking.
• Canada released a consultation paper on • There is currently no regulatory or • As per the new regulations, 12 banks
the merits of Open Banking in January legislative framework mandating Open will be adopting Open Banking in the
2019. Banking. second half of 2019.
• However, the overall progress on Open
Banking has been slow.
CHINA
MEXICO • China’s Open Banking experiment has
produced better results than initially
• Financial inclusion is the
forecasted.
primary objective for adopting
• Widespread adoption of Open Banking
Open Banking, as only 37% of
has enabled banks to roll out products to
the population has bank
one of the largest digitally active
accounts.
consumers in the world.
• Chamber of Deputies approved
• E.g., WeBank, china’s first digital bank,
the FinTech Law thereby
has characterized Open Banking as a
regulating cryptocurrencies,
’3O’ paradigm, i.e., Open Platform, Open
APIs, crowdfunding, and test
innovation, and Open Collaboration.
sandboxes.

SINGAPORE HONG KONG AUSTRALIA

• Singapore is of the leading countries for • The HK Monetary Authority (HKMA) in July • Intimating the UK and paying special
Open Banking adoption in the APAC 2018 published a four-phase approach to attention to the implementation
region. implementing Open Banking in the city. standard.
• Under its Smart Nation Singapore (Phase 1: Product information, i.e., Deposit • The first iteration of Australia’s
Initiative, the government started laying rates, credit card offerings, service Consumer Data Right (CDR) went live on
down the groundwork for Open charges, and other public information; July 1, 2019.
Banking. Phase 2: Customer acquisition, i.e., new • The big four banks were initially asked to
• In November 2016, the MAS, in applications for credit cards, loans, and have consumer data available by July 1,
collaboration with the Association of other products; Phase 3: Account i.e., provide access to consumer,
Banks in Singapore (ABS), published a information, i.e., account balance, credit account & transaction data for credit and
comprehensive roadmap called card outstanding balance, transaction debit cards, deposit accounts, and
Finance-as-a-Service: API Playbook. records, credit limit change, and others; transaction accounts, but that deadline
• In May 2016, OCBC Bank launched the and Phase 4, Transaction processing (i.e., has now been pushed to February 1,
first open API developer platform in payment and transfers) 2020.
Asia, Connect2OCBC, followed by • Hong Kong got its first API exchange
Citibank, Standard Chartered, and DBS platform in a push for Open Banking, which
in 2017. was launched by JETCO in January 2019.

28
Neobanks Leveraging Open Banking

• Open Banking empowers neobanks to reach out to a larger pool of customers, enabling them to
provide better banking services. How?

• For example, neobanks typically offer just a subset of banking services, letting them provide a
superior degree of service, operating at competitive prices. Additionally, by leveraging Open
Banking, neobanks can more easily insource third-party services or data, offering a complete banking
experience. Starling Bank, for example, offers a financial marketplace of third-party apps, integrated
within its mobile banking app. This enables customers to enrich their banking experience with a
variety of solutions such as money management, savings, and pensions.

• Moreover, it provides neobanks with an additional distribution channel to sell and integrate their
services within the banking environment of their partners. In this way, they can reach and service the
customers of other banks as well. TransferWise, for example, has partnered with many neobanks to
offer international money transfers at competitive pricing.

• Overall, Open Banking helps position the neobanks, which have a smaller customer base, on a more
level playing field, with respect to the incumbent banks.

Neobanks typically offer just a subset of banking services,

letting them provide a superior degree of service,
operating at competitive prices. Additionally, by leveraging
Open Banking, neobanks can more easily insource third-
party services or data, offering a complete banking
experience.

29
Case Study

Fidor, an online bank headquartered in Germany, was P2P payments, credit cards, overdraft, customer
one of the earliest players to leverage Open Banking and engagement, etc.
try out the new potential that came along with it. The open
API structure enables the banks to offer a plethora of FidorOS offers a suite of white-label-ready, API-enabled
services. In a way, Fidor Bank also acts as a marketplace digital banking module. The cloud-based banking
for its customers, giving them access to a large selection platform Fidor OS was launched by Fidor and is managed
of financial services, products, and offerings through its by subsidiaries like Mobile Bank, Community Bank, and
partnerships like online accounts with Digital Mastercard, Open Banking Mobile App.

FidorOS is a suite of white-label-ready,

API-enabled digital banking modules

30
Exploring Growth via
Partnerships
• Partnership Continuum (Infographic)
• Neobank- Incumbent Bank Partnership
• Neobank-FinTech Partnership

31
Partnership Continuum

• B2B FinTech players such as Feedzai, Mambu, Paysafe, etc. enable neobanks to leverage cutting-edge infrastructure
solutions, and helping them to shorten the go-to-market time. These players provide ready-made products or
customizable solutions that can directly be integrated with the current core banking solution or can be customized as
per the neobanks requirements.

• By partnering with FinTech, these neobanks are able to cater to niche customer segments that were originally not being
addressed by traditional incumbents like SMEs, millennials, gig economy, new-to-credit customers, freelancers,
underbanked, etc.
32
Neobank-FinTech Partnership

FinTech partnerships via APIs enable these

players to roll out new products and services
at much a cheaper & faster rate.

PARTNERS PARTNERS

PARTNERS PARTNERS

PARTNERS PARTNERS

33
Over the Top Neobanks
(Neobank + Bank Partnership)
Not to be left behind: some of the digital-only platforms that don’t have their own banking licenses. So in
order to offer either a stand-alone product or a bouquet of financial products, they establish partnerships with
incumbents banks that they had initially set out to disrupt. They often take the API route to connect their
customers to services provided by various players. They’ve been doing so to facilitate network speed, or take
advantage of new Open Banking requirements, or, for that matter, for better information security. These
banks seek partnerships with conventional incumbents with an aim to widen the breadth of service offerings
for their customers. As a result, these players no longer need to wait for over a year or invest money to get a
license, as they can leverage the incumbent bank’s existing license to roll out their product offerings. These
players usually differentiate themselves by offering unique features/VAS to their customers.

34
Neobanking, Globally:
Region-wise Analysis
• Region-Wise Analysis Neobank analysis
• Geographies Deep Dive
o Taiwan Virtual Bank License
o Singapore Virtual Bank License
o Leveraging the Positive Outlook of Regulators:
MYbank

35
Neobanking: Region-Wise Breakup

The region-wise break-up shows the maximum challenger/neobanks and alternative models. Another
concentration of neobanks in Europe, followed by the factor providing the UK with an edge in this space is the
Americas. EU’s common standards being introduced, which has
aided neobanks rapidly expand its customer base while
One finds that the UK has a high concentration of remaining in compliance with regulations.
challenger and neobanks owing to two factors, chiefly.
One: compared to the US, which has very high numbers of The first cohort of challenger banks that emerged was
large banks, the UK has far fewer. Two: when it comes to from Europe with the likes of Atom Bank, Tandem
digital banking, the UK can be considered an early Bank, Monzo, Starling Bank, Revolut, and N26.
adopter, going back to the dotcom boom between the late
’90s and early ’00s. However, one interesting trend that came out from this
graph is that most Asian neobanks have been founded
This provided it a ’prime-mover’ advantage, through after 2013.
which the UK came to be at the forefront of

36
Emergence of Neobanks Over
Geographies

2000 to 2014

2015 to 2017

2018 to YTD

37
Neobanking Growth by Geographies

New technologies are not only inflating the consumer expectations from their financial services providers but also
reducing the barriers to entry for innovators. Regulators and policymakers across the globe are acknowledging this
change as constructive development and responding with initiatives that will further the growth of new ways of banking.
This will continue to support the growth of open and neobanking.

Europe has been the bright spot for neobanks for the best Analysts believe that the Open banking regime would be
part of this decade. In comparison to Europe, the US able to do only a little good in the US financial services
seems to be lagging in the growth of neobanking. It is market, whereas the entry of some of the successful
important to point out that the US is home to some of the European neobanks can bring the next wave of disruption
oldest neobanks like Simple (founded in 2009) and Moven in the market.
(founded in 2011) and some relatively new neobanks such
as Chime, Varo, and Aspirations.
European neobanking appears to be the only success
However, neobanking has failed to attract US story so far. That does not mean other geographies are
customers in the last 10 years, and just 3% of not promising for neobanking players. There are a few
millennials have opened a primary checking account in a interesting case studies in Latin America, such as
digital-only bank. JP Morgan’s digital offering Finn failed Nubank, which was recently valued at $10 billion – it
as it could attract only 47,000 customers. Banks’ digital- has achieved exponential growth in its numbers of
only offerings such as JP Morgan’s Finn, or Wells Fargo’s customers. But the real growth is being unlocked in the
Greenhouse have all failed to shake up the market. For APAC region where many countries are formulating their
neobanks to grow in the US, the strategy would be to own virtual banking regimes. Hong Kong, Taiwan, and
combine ’Price + Digital’ and offer easier financial Singapore have already rolled out their virtual
management tools, better rewards programs, and unique banking licensing while Thailand and Malaysia are
user experience for millennials, while baby boomers would expected to follow suit in the years to come.
only care for better interest rates than their traditional
bank accounts.

After Europe, real growth is being unlocked in the APAC region where
many countries are formulating their own virtual banking regimes.
Hong Kong, Taiwan, and Singapore have already rolled out their virtual
banking licensing while Thailand and Malaysia are expected to follow
suit in the years to come.

38
Regulatory Framework: Geography-
wise Analysis

Europe Neobanking Story: The Global Trendsetter

The birth of neobanks, in general, is considered to be the result of the consumer

need for lower banking costs and the need to cater to populations with low or no
access to banking. In addition, neobanks also offer lower interest rates and
greater transparency. Today, one of the primary reasons for the emergence and
development of neobanks in Europe is attributed to the relatively easier regulatory
mechanisms at work. Regulatory support in the form of Payment Services
Directive Law has helped the birth and emergence of neobanks in Europe by
affording them similar functions and access to customer’s data as conventional
banks.

According to recent research, the

customer base in Europe for
neobanks has grown by almost 15
million since 2011, while nearly 2
million individuals have closed
accounts in conventional and
traditional banks (also known as
“incumbent” systems) with regards
to their status vis-a-vis neobanking
systems.

The Payment Services Directive (PSD) was aimed towards the regulation of payment services in the European Union area.
The directive was originally claimed to be instituted to increase competition in the pan-European setting and also to better
articulate the rights and obligations of payment users & providers in the EU. Nevertheless, the PSD was realized to be
inadequate on some counts, such as not enabling the enforcement of this directive to payments and transactions outside
the economic territories of the European Union area and also exhibited different loopholes that could not guarantee user
safety. In response, the PSD2 that was passed in 2016 and enforced from 2018 onwards claims to make online banking
easier and safer, with new provisions for payments and transactions made outside or received from outside the EU
economic area.

One of the significant ramifications of the PSD2 was towards reducing or eliminating the monopoly of banks over customer
data and granting permission to third-party service providers for the use of this data. By giving access to customer data to
third-party service providers as well as increasing authentication and security measures for online payments &
transactions, the PSD2 has been seen and realized to be a revolutionary move towards a standardized uniform digital
market that is more customer-centric than any other policy before. Overall, the implications of the PSD2 are argued to be
significant for the establishment of Open Banking in Europe and elsewhere by allowing users to conduct a variety of
financial transactions and processes through easier access and greater assurance of security. This sense of security and
control over their data has played a role in increasing acceptance of neobanks’ service offerings in Europe.

39
APAC Neobanking Growth Story

In addition to Europe and Latin America, Asia is seen as one of the major regions of the world exhibiting a prospective
environment for neobanks and the development of the open banking paradigm. China, for instance, is expected to become
one of the biggest markets for neobanks by 2025. This is attributed to a large population that is underserved by banking
facilities. Moreover, major e-commerce players such as Alibaba and WeBank have collaborated to create institutions such
as the MyBank that have lent out nearly $300 billion in the last four years to more than 16 million companies. With a default
rate of around 1%, neobanking seems to have significant prospects in China and seems to be reflective to some extent of
the overall trend in Asia.

In 2019, both Taiwan and Hong Kong have become some of the first regions in Asia to issue licenses to neobanks operating
solely as digital banks. Currently, in Asia, the two main factors that are attributed to the increase in popularity and usage of
digital banking and payment services are the low costs associated with the medium for both providers and consumers, and
the large proportion of young users between the ages of 18 and 25 that are familiar with and willing to use online banks for
deposits well as transactions.

Other regions in Asia, such as Singapore, are also speculating and experimenting with ‘digital-only’ neobanks like
OneConnect that seem to be showing enough potential to upset already existing conventional banks in the region. The
Singapore government also launched a regulatory sandbox for FinTech institutions in recent years – an initiative that is
aimed at developing faster, leaner, and meaner financial services in the region. In the Middle-East, the Dubai International
Financial Center (DIFC) has already taken decisive steps towards financial innovation by creating sandbox frameworks for
testing new financial and banking startups in the region. Let us have a closer look at the virtual banking license landscape
in Asia.

40
Neobanking – Growth by Geographies

APAC Neobanking Growth Story

HONG KONG
On March 27, the HKMA granted the first three virtual banking
licenses to Livi VB Ltd. (a joint venture between Bank of China
(Hong Kong), JD Digits, and Jardines), SC Digital Solutions Ltd. (a
joint venture between Standard Chartered, PCCW, HKT, and Ctrip)
and ZhongAn Virtual Finance Ltd. (owned by ZA International).
On April 10, it granted one more license to WeLab Digital Ltd. (a
Hong Kong-based FinTech company). Earlier in May 2019, four
new license were granted to Ant SME Services (Owned by Ant
Financial), Infinium Ltd. (a joint venture owned by Tencent, the
Industrial and Commercial Bank of China, Hong Kong Exchanges

and Clearing, Hillhouse Capital, and others), Insight FinTech HK Ltd. (a joint venture owned by Xiaomi and AMTD Group)
and Ping An OneConnect Company Ltd. (owned by PingAn).

It is important to note that most of the HKMA virtual bank licensees are backed by shareholders who are financial
institutions themselves or tech giants with strong financial capabilities. This would give some peace of mind to HKMA in its
initial years of operations by these virtual banks, which is likely to be high-risk time. According to the business plans of these
licensees, their services will be launched by the end of 2019.

HKMA has told the licensees also to focus on small-and-medium-sized enterprises who lack a long track record and have
had difficulty opening accounts at major traditional banks. Prior to this move, HKMA had earlier warned banks about the risk
of excluding legitimate business from financial services (in 2016). These traditional banks have been stepping up
compliance efforts to meet mounting regulatory requirements.

CHINA
During the early 2010s, China’s regulatory bodies were evaluating
various models of private ownership, taking into account the
implications of online banking services. Even though it adopted a
cautious approach, the China Banking Regulatory Commission
encouraged the formation of emerging banking models that could
be leveraged to raise the available capital for private entrepreneurs.
This, in turn, contributed to economic growth in a manner that
state-owned banks were ill-equipped to. The regulators were also
looking for private banks/online banks that could target rural
regions in China. Accordingly, we have taken a look at one such Chinese player, Mybank (in the later part of this section),
that has been able to leverage the positive regulatory outlook in the country for setting up an SME-focused digital-only
bank.

41
Neobanking – Growth by Geographies

APAC Neobanking Growth Story

SINGAPORE
On June 28, 2019, as many of you might already know, the
Monetary Authority of Singapore (MAS) announced that it would
issue up to five new digital-only bank licenses. The move extends
the eligibility for digital bank licenses to non-bank players as well.
The five new licenses will comprise:
• Up to two digital full bank licenses, allowing the provision of a
range of financial services and deposits to be taken from retail
customers by licensees, and;
• Up to three digital wholesale bank licenses, allowing services to
be provided to SMEs and other non-retail segments by
licensees.
This move is a step towards establishing standalone digital banks, giving an opportunity to non-banks and tech players. Some
of the established FinTech companies, ride-hailing startups, and telecom players are expected to apply for these licenses. If
Singapore follows the Hong Kong/Taiwan approach, we can expect some consortiums and large technology; financial
institutions’ joint ventures will win the digital-only banking license in Singapore.

An estimate by Moody’s investor service suggests that digital banks in Singapore can capture up to 2% of the country’s $24.3
billion worth domestic banking sector. The new virtual banks would hold the potential to shake up the market for underserved
customers and use Singapore as a platform to target Southeast Asia’s SMEs and over 250 million unbanked population. Like
Hong Kong and Taiwan, these banks will be directed towards the SME sector first and would be slowly allowed to increase
market share in the unbanked customer base.

INDIA
The growth of neobanking in emerging markets like India is driven by
the allure of the financial inclusion agenda. Around 200 million
underbanked consumers, and $240 billion SME credit gap, hold the
potential to become breeding ground for open banks. YES Bank’s
NiYO, 811 by Kotak Mahindra Bank, and YONO by SBI are some of the
digital-only offerings by Indian banks. Beyond these, the Indian
markets’ neobanking landscape comprises InstantPay’s neobanking
solutions for SMEs, Open’s SME-focused solutions, and the recently
launched SME-focused neobank EZOTO. Open, InstantPay, and
EZOTO do not have banking licenses; they extend their products &
service offering to clients in partnership with one or more banks. We expect that India will roll out its virtual banking licenses
in the years to come to regulate this growing business model.

42
Neobanking – Growth by Geographies

APAC Neobanking Growth Story

TAIWAN
In Jul 2019, Taiwan issued virtual banking licenses to three
consortiums. One license was granted to LINE Financial Taiwan, led
by Japanese app operator LINE Group that partnered with Taipei
Fubon Commercial Bank and Standard Chartered. The second
license was granted to consortia Next Commercial Bank, led by
telecom operator Chunghwa Telecom and includes Mega
International Commercial Bank, Shin Kong Financial Holding, PX
Mart, KGI Bank, and Trade Van Information Services. The third
license was granted to Rakuten International Commercial Bank,
which was operated by Japanese e-commerce firm Rakuten Inc
and Taiwan’s IBF Financial Holdings. In the case of Taiwan, licensees’ backgrounds involve partnerships between existing banks
and technology and communications firms that possess mature digital platforms such as social networking apps, mobile
telecommunications, and e-commerce platforms. Due to nature of their consortia, Next Bank may focus on SME lending and
money management business, Line would go for online payments first, and Rakuten will attempt to benefit from the integration
of e-commerce and finance.

MALAYSIA AND THAILAND

Regulators in Thailand and Malaysia are also considering digital
banking licenses. In June 2019, Bank Negara Malaysia’s Governor
Datuk Nor Shamsiah indicated that the country’s virtual banking
framework is 50% ready, and over 10 parties have already expressed
interest in setting up the digital banks in the country.

43
Case Study
Regulatory Landscape —
Geographical Analysis
• Regulatory Landscape in Hong Kong
• Regulatory Landscape in Taiwan
• Singapore Virtual Bank License: A Deep Dive
• Mybank: Leveraging the Positive Outlook of Regulators

44
Case Study I:
Regulatory Landscape in Hong
Kong

45
Hong Kong Virtual Banking Landscape

In September 2017, the Hong Kong Monetary Authority (HKMA) kicked off its Smart Banking Initiative under
which multiple initiatives were initiated. One of the key components of the Smart Banking Initiative was the
introduction of new ’virtual banking licenses’ for non-traditional players that wanted to enter into the Hong Kong
banking landscape without setting up physical branches.

Hong Kong is the first Asian country that has been able to successfully provide 8 virtual banking licenses in the
last year. The Hong Kong Monetary Authority expects to facilitate innovation, financial inclusion, and enhanced
customer experience by launching these virtual banks as a part of the Smart Banking Initiative.

It’s worth noting that the HKMA had actually issued its first guidance on the authorization of virtual banks in
2000, but no applications were forthcoming until it released revised guidelines in 2018. Perhaps the most
significant of the revisions was doing away with the requirement that VBs be majority-owned by a well-
established bank or other supervised financial institutions, paving the way for more diverse applicants, including
technology companies.

46
 Virtual Banking License Applicants
Hong Kong Monetary
Authority, received a
total of 33
applications virtual
banking license
application out of
which only 8 have
been granted licenses
so far. HKT

ILLUSTRATIVE

SC Digital Solutions Limited is a joint venture Hong Kong started with three virtual banking licenses.
between Standard Chartered group, Ctrip Finance Hong Kong pioneered APAC’s Smart Banking Era in
(a FinTech focused on travel), and telecom 2019. The same can be said based on the
provider Hong Kong Telecom (HKT) and its parent announcement by the Hong Kong Monetary Authority
company PCCW. Denise Güven will lead the (HKMA) on March 27, 2019, which mentions that virtual
virtual banking operations and will reimagine and banking licenses were granted to SC Digital Solutions
recreate the whole business model. SC Digital Limited, ZhongAn Virtual Finance Limited, and Livi VB
Solutions has also partnered with various vendors Limited under the banking ordinance.
such as Oracle to offer their NetSuite program,
FICO, for support in creating SC’s credit engine. Known for being a considerably opaque market in
terms of the possibility of new entrants and emergence
This same trend of collaboration for technological of new trends, it definitely turned heads when Hong
innovation is apparent in the workings of Zhong An Kong introduced five other virtual banks into the market
Virtual Finance Limited and Livi VB Limited, while within the span of just four months.
the other banks that have received their virtual
banking licenses are diligently involved and
working towards making their services
commercial.

47
The first three license winners were planning to launch their services by the end of 2019, but some postponed it to early
2020. The planned services by these virtual banks will mainly target public retail businesses and SMEs on the basis of
varied revolutionary and customer-centric services. These services are designed to help them carry out routine transactions
easily and also help them maintain operating cycles without physically visiting the banks.

Hong Kong’s ZA Bank has become the first of the eight virtual banks that won banking licenses in 2019 to launch services.
In December 2019, it started the trial run within the HKMA’s FinTech Supervisory Sandbox. ZA Bank’s initial service offering
allows around 2000 users to try its services that include remote account opening, multi-currency savings account, time
deposits, local transfers, and e-statements. ZA Bank and seven other players have opted to go for licenses to become a
neobank.

Whether or not these virtual banks will be able to rekindle the banking landscape in
Hong Kong and challenge the dominance of incumbents, like HSBC, is something
that waits to be seen.
48
Case Study II:
Regulatory Landscape in Taiwan

49
Taiwan Virtual Bank License: A Deep
Dive
The Need of Internet-Only Banks in an Government Support –
already saturated banking sector FSC Initiative
Taiwan is overbanked. Case in point: its 37 banking The Financial Supervisory Commission (FSC) plans to
institutions that operate roughly 5,000 branches for a issue the first two virtual-banking licenses in June. The
population of about 23 million people. The sector’s FSC decided to issue just two licenses in the first round of
US$1.6 trillion in assets are spread among many different approvals to mitigate the effects of the new market
banks; no individual institution is big enough to compete entrants’ arrival on the already saturated banking market,
regionally with global heavyweights. Commission Chairman Wellington Koo said at a news
conference last year. He added that the exit of two banks
Given the surplus of banks here, it may seem surprising from the market in recent years opened up two slots for
that the government has been encouraging new market virtual banks. China Development Financial Holding Corp.
entrants, but there’s a reason for it. Taiwan’s traditional acquired Cosmos Bank in 2014, and Yuanta Financial
lenders aren’t necessarily able to meet the needs of Holding Corp. purchased Ta Chong Bank in 2016.
young entrepreneurs and consumers, both of whom
struggle to access credit and prefer to do their banking The first two licenses will serve as a trial to create new
digitally. Digital/virtual banks could fill that void from financial services platforms for Taiwan, says attorney
digital-first platforms tailored for users in their 20s and Jaclyn Tsai, chair of the Taiwan FinTech Association, and
30s. They could offer everything from micro-lending to a former minister without portfolio.
artificial intelligence-powered wealth-management
services.

PURPOSE:
Issuing internet-only bank licenses is the
FSC’s response to the developing trend
of offering digital services for banks. It
will increase competition in the sector
and better address current consumer
needs, the regulator said in a statement.

Since the banks will be virtual – and in

need of digital expertise – the FSC is
permitting tech firms to take up to a 50%
stake in them. The other half will be held
by either a traditional bank or financial
holding company.

50
Taiwan Virtual Bank License: A Deep
Dive
Who applied for the virtual banking license?
Three consortiums have applied for the first virtual-banking licenses:
• A group led by Chunghwa Telecom (with a 41.9% stake) and Mega Financial Holding (25.1%) has applied
to set up Next Bank, which would offer deposit and lending services, insurance policies, and wealth-
management services.
• Japanese e-commerce giant Rakuten (51%) and Taiwan’s Waterland Financial Holding (40%) are leading
a second group.
• The third consortium is headed by Line Financial, the financial-services arm of Japan’s Line messaging
app, which has applied to hold a 49.9% stake in Line Bank. Four banks – Standard Chartered, Fubon,
CTBC, and Union Bank – would take a joint 40.1% stake in the venture.

Outcome:
The commission said while it had initially planned to give out two new licenses because the three companies
all had different business models and target customers, it had decided to give each of them a license.

Conclusion

• Whilst Taiwan does have 37 banking • Only time can tell whether the
institutions that operate roughly 5,000 introduction of virtual banks will
branches for a population of about 23 revolutionize Taiwan’s orthodox
million people, the country has now banking sector, and whether or not
finally entered the virtual banking more traditional banks will start
landscape. realizing the need to establish a virtual
bank. At least Taiwan has finally
• But why go into virtual banking when realized its need to transform and
Taiwan already has a saturated made its first attempt with the virtual
banking sector? Having a large banking license, and that’s what
number of banks does not necessarily matters.
mean customers are well-banked.
Therefore, the interest surrounding
Taiwan’s virtual banking licenses can
be understood as an effort to disrupt
the banking industry by providing
more customer-centric digital banking
channels for the millennials.

51
Case Study III:
Singapore Virtual Bank License: A
Deep Dive

52
Singapore Virtual Bank License: A
Deep Dive
A deep dive into the upcoming Digital-Only Bank Licenses in Singapore

On June 28, 2019, the Monetary Authority of Singapore (MAS) announced that it would issue
up to five new digital-only bank licenses. The move extends the eligibility for digital bank
licenses to non-bank players as well. The five new licenses will comprise:
a) up to two digital full bank licenses, allowing the provision of a range of financial services and
deposits to be taken from retail customers by licensees, and
b) up to three digital wholesale bank licenses, allowing services to be provided to SMEs and
other non-retail segments by licensees.

This move is a step towards establishing standalone digital banks, thereby giving an
opportunity to non-banks and tech players. In 2000, the MAS had allowed the establishment of
existing banks to have digital subsidiaries called Internet-Only Banks (IOBs).

The MAS Digital Banking License Timeline

June 28, 19
Announcement by Dec 31, 2019 Q2 2021
the MAS for issuing Deadline for digital
up to 5 digital bank bank application
licenses process
Inception of
Business by
Virtual Bank
August 29, 2019 Q2 2020
Launch of application Announcement of
process by the MAS for DB license winners
the licenses

53
Singapore Virtual Bank License: A
Deep Dive
Current Banking Licenses

• Qualifying Full Banks (QFBs):

These banks are allowed to provide a range of services – including the ability to take retail deposits.
Banks of this kind can share their ATM network and provide payment services via the EFTPOS
network. At present, there are four local banks, namely Bank of Singapore, DBS, OCBC, and UOB –
and nine QFBs, including HSBC, State Bank of India (SBI), and BNP Paribas. These banks are allowed
to establish 25 service locations or 50 in case their home country has a free-trade agreement with
Singapore.

These banks also have the provision of setting up Internet-Only Banks (IOBs). In case a local bank sets
it up, the IOB must be a 100% owned subsidiary or must be set up in a joint venture (with the local
bank having the controlling stake). In case it is set up by the QFB, their localized or Singapore-
incorporated banks should have the IOB as its direct subsidiary, and it must meet the capital
requirement of S$1.5 billion.

• Wholesale Banks
These banks, in contrast to QFBs, cannot provide retail banking services. They may, however, provide
other banking services. At present, Singapore has 99 wholesale banks, each of which can have one
office.

• Market Opportunity for Digital-Only Banks: Evolving Needs of Singapore’s Various Customer
Segments
Although MAS has not yet specified the segments they deem underserved, it is possible to draw out
potential segments. In the near future, one expects that the following customer segments could be
targeted:

SMEs: Singapore is brimming Millennials and Migrants/Foreign Workers:

with SMEs, with 99.8% of all Gig Economy Workers: Those in this category are
enterprises belonging to this Singapore has a large engaged in several activities,
category. A whopping 2.5 population of youth, along with but most often end up in
million workers are employed middle-aged adults who are domestic work and
here. There are over 260,000 more willing to accept new construction. The number of
such businesses, and their technologies and adapt to new foreign workers in Singapore
number has only increased over experiences. Moreover, they are stands at 1.39 million as of
time. The government has been often freelancers and have December 2018. Since they
encouraging these enterprises multiple jobs. Singapore may not have financial literacy,
to digitize, in the hope of currently has about 1.2 million access to documentation, or the
improving productivity and millennials, who account for ability to meet the minimum
efficiency. Moreover, it has been about 22% of the total monthly balance required in
noted that the engagement in population. The gig-economy, banks, many prefer to hold
overseas business activity has or those with freelance work, cash. This segment requires
increased over the years, to 83% number ~220,000, reflecting an services that take into account
from 56% in just a couple of increase of 10% in recent years. remittance, connectivity, and
years. This highlights the need mobility.
for cost-effective cross-border
transactions as well.

54
Singapore Virtual Bank License: A
Deep Dive
Understanding Digital-Only Banks’ License Eligibility

1. The application for digital full bank licenses, of 3. The application for digital wholesale bank
which a maximum of two will be available, is open licenses is open to all companies. Up to three
to companies headquartered in Singapore and such licenses will be given out. The MAS expects
controlled by Singaporeans. Foreign companies that the new digital bank licenses will “ensure
are eligible for these full bank licenses if they form that Singapore’s banking sector continues to be
a joint venture with a Singapore company, and the resilient, competitive, and vibrant.”
joint venture meets the headquarters and control
requirements. In contrast to before, this would In addition, the new digital players are expected
mean that IOBs, which were subsidiaries of the to “provide the impetus for existing banks to
four local banks or nine QFBs, are expected to face continue enhancing the quality of their digital
stiff competition. This points to a significant offerings.” The minimum paid-up capital
expansion of digital banking. required is set at S$100 million. Moreover, digital
wholesale banks will not be able to take deposits
2. Digital full bank licenses will be provided in a two- from individuals, except for fixed deposits of at
stage process. Initially, all licensees will be least S$250,000. For an entity to obtain any one
Restricted Digital Full Banks, where the individual of the five digital banking licenses, they need to
deposits must be capped at S$75,000, and they demonstrate not just the ability to meet
must offer only simple credit and investment regulatory requirements but must showcase
products (no derivatives or complex products). technical capability and have a sustainable
Moreover, the initial paid-up capital at the entry business model. There is a need to highlight how
point to be set at S$15 million. Following the they would be able to meet the objectives of
bank’s ability to demonstrate its capability to deeper financial inclusion set out by the MAS.
manage risk, they will be converted into a fully Although the MAS has not specified how track-
functional digital bank, where the minimum paid- record of a company would play a role, it is highly
up capital requirement of S$1.5 billion, and there likely that profitability would be key in
is no individual depositor cap. determining eligibility. Moreover, even regulatory
compliance requires substantial investment in
both technology and talent. There are strict
provisions for reporting, which may potentially
prove difficult for newer entrants/non-financial
enterprise applicants.

To summarise, as per the MAS, the following requirements must be met for an
applicant to obtain a license:

• A clean track record in operating an existing • Compliance with the same suite of rules as
business. incumbent banks, as well as added rules.

• Demonstrated ability of a sustainable digital • Submission of a viable exit plan; should withdrawal
banking business model. be necessary.

• No engagement in value-destructive competition to • Clear value propositions to serve existing unmet or

gain market share. underserved needs.

55
Singapore Virtual Bank License: A
Deep Dive
The Monetary Authority of Singapore received a total of 21 applications that includes 14 applications for the
digital wholesale bank (DWB) licenses and 7 applications for the digital full bank (DFB) licenses. The applications
have come from diverse segments like telecommunication, technology, FinTech, financial institutions, and e-
commerce firms. Most of these applicants have formed consortiums to leverage each of their partner’s unique
value proposition and strengthen their competitiveness for the digital banking license.

The MAS is currently evaluating these applications and will be announcing the final winners by June 2020.
Successful applicants are expected to launch their business by Mid-2021.

minIPO

So what’s the outlook here? On the one hand, FinTech startups will look to partner
with non-banking companies in their pursuit of a digital license in Singapore. On the
other hand, the granting of virtual banking licenses is set to drive competition with
traditional banks, who are, themselves, seeking to target the unbanked population
through partnerships with regional startups.

56
Case Study IV:
Mybank: Leveraging the Positive
Outlook of Regulators

57
MYbank: Leveraging the Positive
Outlook of Regulators
As discussed earlier, the regulators in China have had a positive outlook on the emerging digital banking models. This led
to the setting up of internet giants like WeBank by Tencent and the Alibaba Group-backed MYbank and are offering
online loans and investment products to Chinese users. Baidu, a search engine firm that is often referred to as “China’s
Google,” is also getting into the race by partnering with China CITIC Bank to set up Biaxin Bank, a digital-only bank.

We now take a look at one such Chinese player that has been able to leverage the positive regulatory outlook in the country
for setting up an SME-focused digital-only bank. MYbank, an offshoot of Ant Financial, was launched in June 2015 to serve
small and micro-enterprises in China. Ant Financial received a regulatory license to create an online-only bank and was
among the first of five privately owned banks that were granted this license by the China Banking Regulatory
Commission. However, the bank was initially authorized only to provide loans and didn’t have any authorization to accept
deposits.

Commercial Banking
(Focus on SME Lending)

PORTFOLIO: #EMPLOYEES
As of June 2019, MYbank had worked ~300 no. of employees as of May 2018
with over 400 financial partners and
provided loans of over $290 billion to
approximately 15 million SMEs in
China.

58
MYbank: Leveraging the Positive
Outlook of Regulators
The use of digital and mobile
technologies enabled MYbank to
reduce its operating costs, which
translates into a competitive
interest rate of 6–16% while
brick-and-mortar lenders still
charge 20–40%.

One can suspect that MYbank’s

loan approval rates must be low.
However, interestingly, MYbank’s
approval rate has been around
60% in the last fiscal year, and it
aims to increase this to 80%,
according to Ms. Quan Yu,
General Manager of Risk at
MYbank.

MYbank’s 3-1-0 model and its

use of AI is something the
FinTech community could learn
from.

MYbank focuses on
this segment, which
has designed the 3-1-
0 model of digital
lending.

The 3-1-0 lending enables the MSMEs to complete an online loan application in 3
minutes, obtain approval in 1 second with 0 human touch. It’s not hard to imagine
what it could mean for SME financing statistics in China. As of June 2019, MYbank
had worked with over 400 financial partners and provided loans of over $290
billion to approximately 15 million SMEs in China.

59
MYbank: Leveraging the Positive
Outlook of Regulators

MYbank Loan Portfolio

The nation’s second-largest

lender unveiled a mobile app in
September that can process
loan applications for as much
as 5 million yuan in two
minutes.

60
Emerging Battlegrounds
for Neobanks

61
 Brazil
• Some of the digital-only banks to first target the Brazilian market were Nubank, Neon, Agibank and Banco Original. Out
of this, the player which has been the most successful in the country so far is Nubank with an estimated consumer base
of over 20 million.
• To add to this list, we have international players like N26 and Revolut who are planning to enter this market as a part of
their global strategy.
• It will be interesting to see how these virtual banks in a competitive consumer banking landscape and become the next
Nubank in Brazil.

PRODUCT AND SERVICES

Current Accounts, Mobile
PRODUCT AND SERVICES Phone Insurance, Travel
Accounts, Cards, Loans, Medical Insurance, Financial
Investments, Insurance Management, Debit Cards, and
Loans

FUNDING
NA FUNDING
$682.8 Mn
PRODUCT
AND SERVICES
FOUNDED
Credit Cards and
FOUNDED YEAR
Investments
YEAR 2013
2016

FUNDING
$25.5 Mn

PRODUCT AND
SERVICES
FOUNDED YEAR Digital Account,
2016 Credit Cards and
Loans

FUNDING
$1.1 Bn

FOUNDED YEAR
FOUNDED YEAR
2009
1992

FUNDING FUNDING
NA NA

FUNDING FOUNDED
PRODUCT AND Unfunded YEAR
SERVICES 2017
Portfolio Banking, PRODUCT AND
Investments, Payments, SERVICES
Exchange, Credit, and PRODUCT AND SERVICES Cards, Loans and
Free Digital Accounts Physical and Virtual Debit Cards Accounts
62
 India
• The Indian digital-only landscape is currently dominated by banks like SBI, Kotak Bank and Digibank.
• However, in the past few years we have witnessed over 14 players that have set up digital-only platforms to provide online
banking services for customers. Apart from Paytm Payments Banks, these neobanks are not licensed and have to partner
with a financial institution to roll out their products (e.g. Open partnership with ICICI Bank)

FUNDING PRODUCT AND SERVICES PRODUCT AND SERVICES FUNDING

$28.2M Savings Account, Insurance, Loans & Credit Cards, Insurance, Loans NA
Investments & Investments

FOUNDED YEAR FUNDING FOUNDED YEAR FUNDING FOUNDED YEAR FOUNDED YEAR
2017 NA 2016 NA 2017 2017

PRODUCT AND SERVICES PRODUCT AND SERVICES

Saving & Current Savings Accounts and
Account, Virtual Debit Cards
Debit &
ATM Card,
Fixed Deposit

PRODUCT AND PRODUCT AND

SERVICES SERVICES
Credit Cards, Savings Account
Insurance, Loans and Debit Card
& Investments FUNDING FUNDING
$49.2 M NA
FOUNDED YEAR FOUNDED YEAR
2015 2019

FUNDING Yet FUNDING

to be
$13.2M launched
NA

FOUNDED FOUNDED
YEAR YEAR
2019 2019

PRODUCT AND FUNDING FOUNDED FUNDING FOUNDED PRODUCT AND

SERVICES $35 M YEAR $124 M YEAR SERVICES
Yet to be launched 2017 2014 Debit Card
PRODUCT AND SERVICES PRODUCT AND SERVICES
Business Current Account, Automated Corporate Credit Card,
Accounting, Multibank Connect, Current Account
Developer APIs, Visa Card
63
Mexico
• With an estimated 42 million underbanked customers, Mexico is currently the hottest country for the digital-only banking
players.
• Apart from the homegrown Neobanks like Albo, Broxel and Klar, there are international players like Nubank who are
recognizing the herculean opportunity in providing banking services to this underbanked population.

FOUNDED YEAR FUNDING FOUNDED YEAR FUNDING

2016 NA 2016 $27.1M

PRODUCT AND SERVICES PRODUCT AND SERVICES

Debit Cards and Payments Banking Account, Bill Payments, Debit Card

FUNDING FUNDING
$57.5M $1.5M

FOUNDED YEAR FOUNDED YEAR

2018 2016

PRODUCT AND SERVICES PRODUCT AND SERVICES

Debit Card Credit Cards

FUNDING FOUNDED
$1.1B YEAR
2013

PRODUCT AND SERVICES

Digital Account, Credit Cards and Loans

64
United States
• The second wave of Neobanks in United States is coming from UK, where players like Monzo, and N26 are trying to set
up their global footsteps by penetrating the US market. This new threat from foreign players have compelled the first
wave of neobanks to reset their offenses.
• Incumbents like JP Morrgan and Morgan Stanley also launched their own digital-only banking platform to capture this
customer segment.

FOUNDED FUNDING FUNDING FOUNDED

YEAR $178.4 Mn $394 Mn YEAR
2015 2015

PRODUCT AND SERVICES PRODUCT AND SERVICES

FUNDING Checking accounts, savings Digital Cards in US FUNDING
$47.4 Mn accounts, direct deposits, NA
online bill payments, debit
cards, line of credit, and an
unsecured loan
FOUNDED YEAR FOUNDED YEAR
2011 2016

PRODUCT AND SERVICES

PRODUCT AND SERVICES
Checking Account and Wealth
Wealth Management
Management

PRODUCT AND SERVICES PRODUCT AND SERVICES

Accounts and Digital Card Savings Accounts, Loan and
in US Credit Cards

FUNDING FUNDING
$682.8 Mn NA

FOUNDED YEAR FOUNDED YEAR

2013 2016
PRODUCT AND PRODUCT AND
SERVICES SERVICES
Debit cards and Online Checking, High
investments Yield Accounts, Shared
Checking, Certificates Of
Deposit and Budgeting

FUNDING FUNDING
$808 Mn NA - Acquired

FOUNDED FOUNDED
YEAR YEAR
2013 2009

65
Australia
• The emergence of neobanks in Australia, in simpler terms, can be termed as a David vs Goliath Story. The neobanks like
86,400 Xinja, Judo Bank have been acquiring millions of customers over the years, and have been creating waves in the
Asutralian financial services industry which was primarily dominated by the Big Four Banks i.e. Commonwealth Bank of
Australia, Westpac Banking Corporation, Australia and New Zealand Banking Group, and National Australia Bank.
• The rise of these neobanks can primarily be attributed to the introduction of a regulatory framework by the Australian
Prudential Regulatory Authority (APRA) that allowed any fintech startup with over $5 million in assets to register to
become authorized deposit-taking institutions and apply for restricted banking licenses.

FOUNDED FUNDING
YEAR $336M
2015
FUNDING FOUNDED
$2.5 Mn YEAR
2016

FUNDING
$3.4 M PRODUCT AND SERVICES
Current Accounts, Mobile
Phone Insurance, Medical
Insurance, Budgeting, Global
Transfer, Debit Cards, and PRODUCT AND SERVICES
FOUNDED YEAR
Loans. Checking Accounts, Debit
2017
Cards and Financial
Management
PRODUCT AND SERVICES
Bank Accounts, Prepaid Cards
and Home loans

FOUNDED YEAR
FOUNDED YEAR 2017
2017
PRODUCT AND
PRODUCT AND SERVICES
SERVICES Business Loans, Line
Savings Account and of Credit, Equipment
Budgeting Loans, Finance Lease
and Home Loans
FUNDING
FUNDING $364.9 Mn
NA

PRODUCT AND SERVICES PRODUCT AND SERVICES

Savings Accounts Transactions and Savings
Accounts

PRODUCT AND SERVICES

Savings Accounts, Term Deposits,
FUNDING and Home loans FUNDING
$8.5 M Looking to raise funds

FOUNDED FUNDING FOUNDED FOUNDED

YEAR NA YEAR YEAR
2017 2008 2018

66
List of Independent
Neobanks

67
Global Challenger/Neobank List

AMERICAS (1/2)
Name Founding Year Domain Funding ($, Mn)

2016 empower.me 24.5

2013 aspiration.com 67.5
2016 denizen.io Undisclosed
2017 abacabanc.com 0.8
2017 azlo.com Unfunded
2016 northone.com 23.3
2017 getoxygen.com 2.3
2009 simple.com 15.3 (Acquired)
2015 varomoney.com 178.4
2016 holawink.com Unfunded
2013 chimebank.com 808.8
2016 cogni.is 7.1
2018 step.com 26.3
2017 kruma.co Unfunded (Closed)
2018 point.app 1.4
2016 iammoney.com Closed
2017 helloteller.com Unfunded
2017 joust.com 7.8
UnBanked 2015 unbanked.net Unfunded
2016 zero.app 47.0
2016 banknovo.com 4.8
2016 waleteros.com 0.6
2017 likebank.com Unfunded
2019 zenus.com Unfunded
2015 nymbus.com 33.4
2011 fondeadora.com 4.2

68
Global Challenger/Neobank List

AMERICAS (2/2)
Name Founding Year Domain Funding ($, Mn)

2017 getevery.com Acquired

2014 koho.ca 57.5
2017 fostrum.com Undisclosed
2016 unobank.com.br Unfunded
2017 miflink.com Undisclosed Seed
2016 albo.mx 27.1
2017 agibank.com.br Unfunded
2016 neon.com.br 120.5
2013 nubank.com.br 820
2014 jeitto.com.br Undisclosed seed
2018 c6bank.com.br Unfunded
2018 borocard.com 0.065
2019 onefinance.com 26.0
2020 zefi.io 0.15
2012 kapital.mx 4.0
2019 sablecard.com 2.7
2019 cora.com.br 10.0
2018 cuenca.com 9.6
2016 spaceshipinvest.com.au 7.0
2015 current.com 52.6
2018 rho.co 4.9
2017 mercury.com 26
2018 klar.mx 7.5
2016 grasshopper.bank 131.2
2017 envel.ai Undisclosed seed
2019 kabnequity.com Unfunded

69
Global Challenger/Neobank List

EUROPE (1/3)
Name Founding Year Domain Funding ($, Mn)

2013 n26.com 683.0

2015 monzo.com 422
2014 starlingbank.com 410
2015 revolut.com 844
2015 oaknorth.com 1000
2014 atombank.co.uk 538
2004 cashplusgroup.com Unfunded
2016 chetwood.co 69.4
2016 getcoconut.com 2.0
2017 countingup.com 3.75
2014 lintelbank.com Undisclosed
2004 masthaven.co.uk 72.88
2013 monese.com 79.18
2013 tandem.co.uk 158
2015 tide.co 72
2015 https://getdot.io/ Unfunded
2017 anna.money 16.1
2017 fiinu.com 0.7
2017 amaiz.com Unfunded
2017 babbapp.com 1.8
2017 civilisedbank.co.uk 0.12
2016 arromoney.com Undisclosed
2016 uaccount.uk Unfunded
2017 bankera.com 0.146

70
Global Challenger/Neobank List

EUROPE (2/3)
Name Founding Year Domain Funding ($, Mn)

2017 shine.fr 12.5

2009 fidor.de Acquired
2013 medirect.com.mt Acquired
2015 brabank.no Unfunded
2013 avuba.de 0.0005 (Closed)
2012 compte-nickel.fr 11.6 (Acquired)
2016 instabank.no Unfunded
2016 wizink.es Undisclosed
2015 lunarway.com 74.0
2017 loan2cash-app.com Unfunded
2009 fire.com Unfunded
2017 getpenta.com 40.3
2016 qonto.eu 151.6
2016 yomo.de Undisclosed seed
2017 bnext.es 30.6
2018 fundsfy.com 2.5
2013 3s.money Undisclosed seed
2017 fairmoney.ai 12.4
2012 getpfc.com 5.6
2012 tink.com 208
2018 dozens.com 13
2019 220bank.com 1.2
2018 yapeal.ch Undisclosed seed
2014 loot.io 10.4

71
Global Challenger/Neobank List

EUROPE (3/3)
Name Founding Year Domain Funding ($, Mn)

2016 bankup.io Unfunded

BANKSMART 2014 banksmart.pl Unfunded
2018 kard.eu 3.4
2016 kontist.com 5.8
2017 margo.com 7.8
2018 yeeld.com 1.6
2017 folio.no 3.1
2018 bnc10.com 1.1
2017 bancium.io Unfunded
2017 bankomo.de Unfunded
2006 rebilla.com Unfunded
2007 banknorwegian.no Unfunded
2016 solarisbank.de 105
2019 pixpay.fr 12.5
2019 iamlanistar.com 2.5
2017 elyps.com 1.7
2018 indo.is 1.1
2017 easyeuro.eu 4.7
2017 myinvestor.es 22.3
2018 rebanknow.com 2.8
2018 b-north.co.uk 8.1
2018 currensea.com 1.1
2017 baanxapp.com 3.4
2019 yayzy.com Undisclosed seed
2018 founders.money 10.0

72
Global Challenger/Neobank List

AFRICA +
MIDDLE EAST
Name Founding Year Domain Funding ($, Mn)

2016 lidya.co 9.38

2018 sumobank.ng Unfunded

2017 kudabank.com 1.6

2015 nowmoney.me 2.3

2016 jhela.co.ke -

2015 bettr.finance Unfunded

2016 bankclearly.co Unfunded (Closed)

2016 bankzero.co.za Unfunded

2016 suntrustng.com -

2016 kudi.com 6.7

73
Global Challenger/Neobank List

ASIA +
OCEANIA (1/2)
Name Founding Year Domain Funding ($, Mn)

2015 mybank.cn Unfunded

2006 tinkoff.ru 90.0
2015 neat.hk 16.0
2017 payzello.com 0.1
2017 xpence.co Unfunded
2018 aerapass.io Unfunded
2018 ariv.al 3.3
2017 pesave.com Unfunded
Nuo 2018 getnuo.com 0.25
2015 goniyo.com 49.2
2018 sadapay.pk Unfunded
2016 bankopen.co 37.4
2017 paytmbank.com Unfunded
2018 eulo.io Unfunded
2009 banko.com.ph Unfunded
2013 novustech.com.sg Unfunded
2016 douugh.com 2.5
2017 86400.com.au 55.5
2014 ferocia.com.au Unfunded
2017 voltbank.com.au 68.8
2014 webank.com 450
2017 xinja.com.au 127

74
Global Challenger/Neobank List

ASIA +
OCEANIA (2/2)
Name Founding Year Domain Funding ($, Mn)

2013 welab.co 556

2019 epifi.com 13.2
2015 kyash.com 70.4
2018 tonikbank.com 6.0
2019 amicabank.com 26.0
2015 bank-juno.com 3.0
2019 yelobank.in Undisclosed seed
2018 aspireapp.com 41.5
2019 - 0.01
2016 Judo.bank 380

75
Prominent Global
Neobanks: A Deep Dive
• Snapshot of Some Leading Neobanks
• Evaluation Metrics: Competitive Analysis
• Case Study
o Setting Up a Bank with No Legacy: Starling Bank
o Nubank: A Brazilian FinTech Worth 10 Billion
Dollars

76
 Some Innovative Neobanks

Chime lets users get paid early up to two Fiinu has developed an automated lending Online bank Tangerine also offers its
days with the Early Direct Deposit feature. It robot called Fiinuscore which – combined banking services (account opening, cheque
adds money as soon as it receives a with PSD2 and Open Banking – will be able deposit, account checking, etc.) to
notification of the transaction from the to provide small overdrafts to millions of customers through cafés, pop-up locations,
user’s employer and immediately transfers people within the payday loan price cap. and kiosks. People can come to talk about
the funds to the user’s account. This will help consumers to minimize their finances and savings goals face-to-
overdraft fees. face.

bunq lets users link one card to two bunq BankMobile Vibe provides a student- BABB is building a decentralized banking
bank accounts at the same time using its focused, digital-only, non-interest-bearing platform that leverages blockchain and
patent-pending Dual PIN technology. Users checking account with free access to over biometrics, which will enable anyone to
can also switch the accounts linked to the 55,000 ATMs and features such as money access a UK bank account and P2P
cards. management tools. financial services.

Rise, a digital banking app for migrant Starling Bank has launched a marketplace Root provides a bank account with full API
workers in the UAE, helps domestic workers banking platform, which integrates with access, which is developed in partnership
(the majority of whom remain unbanked), to financial services spanning pensions, with Standard Bank. It lets developers
become financially independent. It provides savings, travel insurance, and mortgage control their money programmatically, build
banking services in partnership with United brokerage. This helps Starling bank to their own features such as fetch
Arab Bank. It has also tied up with UAE provide users with access to a choice of transactions, view balances, make
Exchange to offer better exchange rates for third-party money-related apps & services payments, or update beneficiaries, etc. It
migrant workers. and to create a network effect on both sides comes with a programmable Mastercard.
of its market.

Pepper, an Israeli mobile-based bank, Spending overseas is one among a number In a world where businesses would spend
offers live customer service by professional of potentially fraudulent activities globally. hours trying to reconcile all their
bankers available around the clock (24/7) Banks routinely suspend unusual transactions and be forced to juggle
via video chat. transactions without notifying the customer between multiple tools to manage their
or insist on a call-back to the fraud finances, Open provides an easy solution. It
department. UK challenger bank Tandem helps to collect payments, auto-reconcile
flags potentially suspicious activity via push transactions, make seamless payouts,
notification and gives users a nudge; if they auto-generate accounting reports, conduct
confirm that it’s them conducting the expense management, all on a single
activity, they can continue spending hassle- platform. Open also exposes develop-
free. friendly APIs for SMEs & startups to
integrate banking into their business
workflows.

We have conducted a deep dive into some of these

innovative neobanks in this section. 77
 UNITED KINGDOM

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include current accounts, mobile phone

insurance, medical insurance, budgeting, global transfers,
Jul 14, 2016
cryptocurrency, debit cards, and loans.
Jul 14, 2016
Jul 20, 2016 $1.21M, Equity Crowdfunding
FOUNDING YEAR TOTAL FUNDING
Jul 20, 2016 $1.21M, Equity Crowdfunding
2015 Total : $836M Jul 11, 2017 $66M, Series B
Jul 11, 2017 $66M, Series B
Jul 30, 2017 $5.3M, Equity Crowdfunding
REVENUE MODEL VALUATION Jul 30, 2017 $5.3M, Equity Crowdfunding

• Subscription premium $5.5B (Q1 2020) Apr 26, 2018

Apr 26, 2018 $250M,$250M,
Series CSeries C
accounts
• Revolut also charges Feb 17, 2020 $500M, Series D
exchange rate fee
between currencies
on weekends only
• Loans at 9.9% APR

PARTNERSHIPS COMPETITION LICENSE

N26, WorldRemit, TransferWise, WeSwap, Full banking license
• PensionBee • ETF Matic
Juspay, Braintree, and Swissquote.
• Trussle • Optimal Payments
• Bricklane.com • ClauseMatch
• Lending works • InComm
• Simple • QIWI
• Xero

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Currently in Europe and Australia; plans to launch in the US, Canada, New
Zealand, Singapore, and Japan.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

10 Million users (Feb 2020); 1.1 Total transaction volume of over $25B to date. Monthly transaction volumes
Million daily active users (Oct 2019) jumped from $200M to $1.5B (Till Oct 2019)

Community for sharing and testing ideas

78
Copying or distribution without written permission is prohibited 78
Users can exchange more than 29 cryptocurrencies The Open API allows business customers to make the Revolut + Apply Pay
 GERMANY

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include current accounts, mobile phone

insurance, travel medical insurance, financial management,
May 1, 2013 $0.03M, Seed Round
debit cards, and loans.
Jun 19, 2014 $2M, Seed Round
FOUNDING YEAR TOTAL FUNDING
Apr 16, 2015 $11.19M, Series A
2013 Total : $682.8M
Jun 21, 2016 $40M, Series B

REVENUE MODEL VALUATION Mar 19, 2018 $160M, Series C

N26 offers a free basic $3.3Bn (Jan Jan 9, 2019 $300M, Series D
account and then has 2020)
two-tiered subscription Jul 17, 2019 $170M, Series D
options for N26 Black
and N26 Metal.

PARTNERSHIPS COMPETITION LICENSE

Starling Bank, Revolut, Curve, and Full banking license
• Token.io • OptioPay
TransferWise.
• Barzahlen • Amazon
• TransferWise • Lending club
• Clark • Robinhood
• auxmoney • FinanceFox
• Raising • Mastercard
• Vaamo • Allianz
• Nutmeg • Mambu

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes The US and 24 European countries.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

5 Million users; N26 currently handles $224 Mn(Assets)
a volume of €2B per month, which Monthly transaction volume: Euro 2.5 Bn (Jan 2020)
represents 400 transactions per
minute.

79
79
Premium memberships that offers benefits like travel insurance, Contactless card for business Cashback offers by using N26 Mastercard
 INDIA

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Instant payment accounts, unified dashboard to manage

multiple bank accounts, Swift expense management that comes
integrated with expense cards, invoicing, quick bulk payouts,
developer-friendly Open Banking APIs, simplified payment
gateway, automated accounting & bookkeeping, and credit cards
built exclusively for startups. June 2019
$30M, Series B

FOUNDING YEAR TOTAL FUNDING

2017 Total : $35M

Feb 2019 $5M, Series A

REVENUE MODEL VALUATION

SaaS & per transaction; $150M as of

revenue share for Series B
issuer commission
for cards.

PARTNERSHIPS COMPETITION LICENSE

No direct competitors in India. No license
• ICICI Bank & 9 other banks
• Visa

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes APAC, the Middle East, and the US.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

350,000+ SMEs (Oct 2019) $10B in transaction volume; INR 2500 crores in deposits. (Oct 2019)

Offers payment APIs that enable users

Automated bookkeeping solutions for SMEs
80
to create tailored solutions
80
 UNITED KINGDOM

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include current accounts, insurance, B2B

accounts, money transfers, debit cards, and loans. Jan 11, 2016 £48M, Series A

FOUNDING YEAR TOTAL FUNDING Apr 24, 2018 £10M, Series B

2014 Total : $402M Feb 13, 2019 £75M, Series C

Feb 22, 2019 £100M, Grant

REVENUE MODEL VALUATION
Oct 23, 2019 £30M, Venture Round
• Net interest income NA
• Treasury income Feb 10, 2020 £60M, Venture Round
• Interchange income
• Fees & commissions

PARTNERSHIPS COMPETITION LICENSE

Monzo and Revolut. Full banking license
• PensionBee • Raisin
• Yolt • Wealth
• Flux Simple
• Yoyo • CreditLadder
• Tail • FreeAgent
• Moneybox • Tribe
• KASKO Payments
• Habito • Direct Line
• Bottomline • Post Office
• Garmin Pay

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes APAC, the Middle East, and the US.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

1.25 Million Users (Feb 2020) £1.25 billion in deposits (Feb 2020)

81
APIs for developers Users can send and receive money throughout Europe for free via their euro account
81
 UNITED KINGDOM

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include current accounts, money

transfers, overdraft, and loans. Mar 7, 2016 £1M, Equity Crowdfunding
Oct 21, 2016 £4.8M, Series B
FOUNDING YEAR TOTAL FUNDING Feb 23, 2017 £19.5M, Series C
2015
Mar 27, 2017 £2.5M, Equity Crowdfunding
Total : $394.54M
Nov 6, 2017 £71M, Series D
Nov 15, 2017 £878.1K, Equity Crowdfunding
REVENUE MODEL VALUATION
Oct 31, 2018 £85M, Series E
• Monzo makes money $2.5B Dec 3, 2018 £20M, Equity Crowdfunding
in the UK through
services on top of a Jun 25, 2019 £113M, Series F
bank account, like
selling insurance or
collecting fees from
PARTNERSHIPS
overdrafts. COMPETITION LICENSE
N26, Curve, Tandem, Monese, Starling Bank, Full banking license
• Jumio • Shawbrook
Atom Bank, and Nubank.
• TransferWise bank
• Sutton Bank • Moneybox
• Xero • PayPoint
• FreeAgent • Funding
• OakNorth Xchange
• Flux • UK Financial
Capability Lab

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Currently in UK; plans to launch in the US in 2019.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

3.7 Million users (Jan 2020) $20 Million in assets and $568 Million in deposits (Jan 2020)

82
Offers a Current Account Switch Service that enables Enables users to use the Monzo Card globally Loan calculator for users
users to switch to Monzo without any hassles and withdraw money for free to understand their loan 82
 UNITED KINGDOM

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include mortgage, term deposit

accounts, business loans, B2B accounts, and savings
accounts.
Dec 4, 2014 $30.3M, Venture Round

FOUNDING YEAR TOTAL FUNDING Nov 24, 2015 $99.6M, Venture Round

2014 Total : $521.28M Mar 3, 2017 $100.8M, Venture Round

Jun 20, 2017 $36.4M, Debt Financing

REVENUE MODEL VALUATION
Venture
Mar 7, 2018 $181.0M, Round
• Net interest income $660M (July 2019)
• Treasury income
Jul 22, 2019 $60.7M, Venture Round
• Fees & commissions
from upselling their
services and
promoting a choice of
brokers, earning
commission.

PARTNERSHIPS COMPETITION LICENSE

Monese, Monzo, Revolut, and Starling Bank. Full banking license
• Thought • Bacs
Machine • TruNarrative
• Deposit • MuleSoft
Solutions

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Primarily in the UK

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

65,000 customers as of October 2018 The bank estimates that its total lending amounts for homeowners and small
businesses is £2.4B, supported by growth in deposits to £1.8B.

Fixed saver for a particular Uses face and voice as Check for mortgage with the Fixed savers for users Fixed savings up to 2.06% 83
period of time passwords help of a code up to 2 years AER
83
 CHINA

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include SME finance, financial

management, consumer loans, and auto loans.

FOUNDING YEAR TOTAL FUNDING

2014 Jun 6, 2016 $174.0M,

Total : $174.08M Venture Round

REVENUE MODEL VALUATION

Interest income from $21.3B as of

loans November 2018

PARTNERSHIPS COMPETITION LICENSE

MYbank Full banking license
• More than 14 partners (banks
and financial institutions)

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Primarily in China; plans to launch in Australia by 2019.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

18 Million monthly users The company’s lending volume reached about 120B yuan ($17.3B) in 2018.

Auto loan Smart retail Personal finance management

for underbanked population

84
84
 CHINA

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include SME financing to small and

medium-sized businesses.

TOTAL FUNDING
Looking to raise about
FOUNDING YEAR
6B yuan ($87M) in its
2015 Total: Looking to raise $871M maiden fundraising, valuing
the company at 24B yuan.
REVENUE MODEL VALUATION

Interest rates of 6–16% NA

PARTNERSHIPS COMPETITION LICENSE

WeBank Full banking license
NA

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

No Only in China

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

18 Million registered users as of Has disbursed loans of $290B as of July 2019.
March 2019

Innovative 310 lending model Credit/loan products for rural population

to approve & disburse loans

85
85
 AUSTRALIA

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include financial management, home

loans, debit cards, and prepaid cards.

Mar 28, 2018 $1.63M,

Equity Crowdfunding
FOUNDING YEAR TOTAL FUNDING

2017 Total : $3.4M

$1.76M,
Jan 15, 2019 Equity
REVENUE MODEL VALUATION Crowdfunding

Interest Income $94.2M as of January

2019

PARTNERSHIPS COMPETITION LICENSE

NA Volt, Revolut, and 86 400. Lite banking license

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Only in Australia

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

25,000 Users (Feb 2020) Xinja Bank held over A$300 million in deposits (Feb 2020)

Intuitive interface for first-time app set up

86
86
 AUSTRALIA

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include a savings account for users.

FOUNDING YEAR TOTAL FUNDING Jan 23, 2019 $8.5M, Corporate Round

2017 Total : $78.5M $8.5M,

Corporate Round

Jan 18, 2020 $70M, Series C

REVENUE MODEL VALUATION

Yet to announce $285 Mn as of Jan

2020

PARTNERSHIPS COMPETITION LICENSE

• Temenos Xinja, Revolut, and 86 400. Full banking license
• PayPal
• iTWire
• Iress

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Only in Australia

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

40,000 Customers Waiting Yet to launch
List

Community for sharing and testing ideas Soon to be launched

87
Copying or distribution without written permission is prohibited 87
 UNITED KINGDOM

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include 12/24/36-month fixed rate cash

ISA, cash ISA, B2B accounts, term deposit accounts, Jan 1, 2015 $27.9M, Seed Round
investments, and loans.
Nov 11, 2015 $80.2M, Series A

FOUNDING YEAR TOTAL FUNDING Jan 3, 2017 $33.4M, Series B

2015
Oct 12, 2017 $195.6M, Series B
Total : $1B
Nov 3, 2017 $109.3M, Series B
REVENUE MODEL VALUATION Sep 6, 2018 $100.5M, Series B
Interest income $2.8B as of February 2019 Feb 8, 2019 $442.2M,
Venture Round

PARTNERSHIPS COMPETITION LICENSE

NA Monese, Monzo, Revolut, and Starling Bank. Full banking license

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Only UK; currently no plans to acquire licenses elsewhere, but has plans to
go global through its subsidiary OakNorth AI.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

55,000 savings customers The bank currently has a loan book of more than £3bn.

Mortgage product for high-net-worth individuals and SMEs Competitive rates compared to other banks in the market

88
88
 BRAZIL

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include savings accounts, loans, and

credit cards with an annuity fee.
Jul 5, 2013 $2M, Seed Round

FOUNDING YEAR TOTAL FUNDING Sep 25, 2014 $14.3M, Series A

2013 Total : $820M Jun 2, 2015 $30M, Series B
Jan 7, 2016 $52M, Series C
REVENUE MODEL VALUATION
Apr 27, 2016 $56M, Debt Financing
• Interchange fees whenever $10B as of July 2019
its card is swiped. Dec 6, 2016 $80M, Series D
• Foreign exchange fees for
international transactions Aug 17, 2017 $120M, Debt Financing
and interest on unpaid
balances. Mar 1, 2018 $150M, Series E
• Digital accounts generate
interest income from
Oct 8, 2018 $180M, Secondary Market
investments.
Jul 26, 2019 $400M, Series F
• Charges fixed fees every
time its debit card is used
to withdraw money.

PARTNERSHIPS COMPETITION LICENSE

NA N26 and Digio. Full banking license

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

No Primarily Brazil; international expansion to start with Mexico and Argentina.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

20 Million customers $1,566 Million in Assets and $585 Million in Deposits

Offers a credit card to its users Loan stimulator to verify selection

89
89
 UNITED STATES

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include debit cards and investments.

Aug 30, 2013 $3.8M, Seed Round
Nov 5, 2014 $8M, Series A
FOUNDING YEAR TOTAL FUNDING
May 19, 2016 $9M, Series A
2013 Total : $808.8M
Sep 27, 2017 $18M, Series B
May 31, 2018 $70M, Series C
REVENUE MODEL VALUATION
Mar 5, 2019 $200M, Series D
Debit card transaction $5.8 Bn as of March
fee – earns about 1.5% in 2019 Dec 5, 2019 $500M, Series E
interchange revenue
from Visa.

PARTNERSHIPS COMPETITION LICENSE

Green Dot Bank Simple and Moven. No banking license

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

NA Only the United States

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

6.5 Million users as of September Chime’s monthly transaction volume tops $1B; about $10B in transaction
2019 volume across its cards as of January 2019.

Users can get paid two days prior to their deposit with early direct deposit

90
90
 UNITED KINGDOM

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Product offerings include automated savings, term deposit

accounts, investments, and credit cards.

May 11, 2016 $26.7M, Series B

FOUNDING YEAR TOTAL FUNDING

2013 Total : $90.28M

May 19, 2016 $2.7M, Equity Crowdfunding

Funding
Jan 3, 2017 $42.5M, Round
REVENUE MODEL VALUATION

• Fees and commissions No official record Nov 22, 2018 $18.2M, Venture Round
by upselling their credit
cards.
• Tandem makes money
from customers buying
into their product.
• Credit card interest &
fees: Credit card
withdrawal fees and
18.9% APR on the
service.

PARTNERSHIPS COMPETITION LICENSE

• Token • Stripe Starling, Monzo, Atom, and Revolut. Full banking license
• Personetics • Convoy

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Primarily the UK; planned expansion to Hong Kong in 2019.
Also plans to launch trials in the rest of Europe in 2019.

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

1 Million Users (Feb 2020) Customers have spent over £100 million on their credit cards (January 2019)

A journey credit card that enable users Users can win cashback rewards
to build their credit history with the usage of credit cards 91
91
 UNITED STATES

PRODUCT & SERVICES FUNDING HISTORICAL TRENDS

Varo provides checking accounts, savings accounts, direct

deposits, online bill payments, debit cards, predictive
forecast of cash flow, line of credit, and an unsecured loan May 2, 2016 $28.4M, Private Equity Round
through its app (currently with the backing of The
Bancorp).
Jan 15, 2017 $5M, Debt Financing
FOUNDING YEAR TOTAL FUNDING

2015 Total : $174.8M

Jan 18, 2018 $45M, Series B

Jul 16, 2019 $100M, Series C

REVENUE MODEL VALUATION

• Interest income No official release

• Interest on loans

PARTNERSHIPS COMPETITION LICENSE

• Bancorp Bank Affirm, Earnin, Monzo, Chime, and N26. Full banking license
• Temenos

OPEN BANKING GLOBAL EXPANSION (INTER EU, US, EMERGING COUNTRIES)

Yes Operates only in the US

TOTAL USERS COUNT TRANSACTION VOLUME (DEPOSITS, ASSETS)

1 Million Users as of Oct 2019 $600 million in deposits as of July 2019

Access to deposits two days prior to payday No fee ATM withdrawal from more than 55000+ ATMs

92
92
Case Study
Prominent Global Neobanks
• Starling Bank – Setting up a Bank with No Legacy
• Nubank: A Brazilian FinTech Worth $10 Billion

93
Case Study I:
Starling Bank – Setting up a Bank
with No Legacy

94
Starling Bank – Setting up a Bank with
No Legacy
Starling Bank is a fully UK-licensed digital, mobile-only challenger bank founded in 2014 by Anne
Boden (formerly COO of Allied Irish Bank). Starling offered its first mobile personal current account
in May 2017 and services individuals and small businesses. It also provides ’banking services,’
including a scalable cloud-based Banking-as-a-Service proposition and real-time access to
payment services for third-parties. It is one of the few challenger banks to have set up its own
technology stack compared to most peers who often rely on third-party core-banking systems.

Starling Bank in Numbers

PERSONAL EURO STRONG DEPOSIT

ACCOUNTS ACCOUNTS TEAM

695k+ 22k+ 600+ 600 Mn

BUSINESS AND AVERAGE SENIOR TRANSACTIONS

SOLE TRADER APPLE STORE POSITIONS HELD PROCESSED PER
ACCOUNTS RATING BY WOMEN MONTH

59k+ 4.9 39% 10 Mn

95
 Starling Bank – Setting up a Bank With
No Legacy
How does Starling Bank work?

Starling Bank issues the customer with a Contactless Mastercard debit card. You can control your entire
account through an app on your phone. The app stays focused on the essentials with a clean, minimalist design
and easily accessible tabs to view other features. These features include making payments, adding or
withdrawing money, transferring money, and keeping tabs on your daily spending habits updated in real time.

Pay: Regular payment features along with the ability to transfer your current standing orders from your old brick-
and-mortar bank.

Timeline
• Founder Anne Boden sets up Starling Bank
2014 • Starling engages with UK and EU banking
Firm Foundations regulators (The FCA, the PRA, the FSCS, the
EBA, the ESMA, the ESRB )

• Development begins on the AWS Cloud

• Regulators bring up PSD2 2015
• Starling sees an opportunity and started Setting to Work
working on an API

• Starling Enroll in AWS Activate

• Starling is granted a provisional banking
2016 license, and a new round of funding
Up and Running • The first debit cards are sent out to customers
• Starling enables high-speed payments for
customers

• Starling is granted a full UK banking license

• The first iteration of the Starling app becomes
available in the App Store 2017
• The open API is ready, and Starling Marketplace
Fully Licensed
launches
• Mobile banking sweeps the UK

96
Starling Bank – Setting up a Bank With
No Legacy
Add Money: Add money (max £250 per day receive euros for free. Screenshot
currently) to your account or transfer as much as you
like using ’Faster Payments’ and online banking. Marketplace Model: Starling’s Marketplace is an
open API, offering consumers a wide range of
Spending: A real-time record of your spending competitive third-party financial products and
habits with advice for areas where you can save. services (e.g., savings & investment, insurance,
pensions, mortgages, bill management, P2P
Security features include completing a customer’s investing, etc.) through partners such as Pensionbee,
initial registration with a video and photo-ID, the Wealthify, Wealthsimple, Kasko, and Habito. The
ability to deactivate a card with just a push of a bank also offers personal and business customers a
button, real-time updates of financial transactions, contactless debit Mastercard.
and notifications for any unusual activity.

Starling allows customers to open a current account To facilitate small business

in 10 minutes with full controllability through their
mobile app. Its modern technology framework is
accounts, Starling Marketplace has
capable of quickly adapting to rapid changes in partnered with accounting
customer needs; using Starling’s interface, software platform Xero, to
customers can also do international money transfers,
easy bill management (via third-party integrations
automatically integrate their
with Flux), and manage investments (via Moneybox). banking transactions into the
The bank recently also introduced Euro accounts, cloud.
which allow U.K. customers to hold, send, and

Starling’s
Market-
place
Model

97
Starling Bank – Setting up a Bank With
No Legacy

The total funding

Funding Historical Trends raised by Starling Bank
£100M since its inception is
Grant £323 million (including
£75M £60M debt financing).
Series C Venture
£48M Round
Series A £30M The latest round of
Venture
Round
funding was in Feb
£10M 2020 when it raised a
Series B
total of £60 million via a
venture round.
Jan. 11, April 24, Feb. 13, Feb 22, Oct 23, Feb 10,
2016 2018 2019 2019 2019 2020

Starling Bank’s Customer Shows Strong Growth

Q4 2019 1 Mn+ Any doubts as to the

Q3 2019 0.7 Mn bank’s lasting power
Q2 2019 0.49 Mn were removed when
Q1 2019 0.48 Mn membership shot up
Q4 2018 0.24 Mn from 50,000 to 400,000
Q3 2018 0.16 Mn in the United Kingdom
Q2 2018 0.11 Mn in 2018. Growth in 2019
Q1 2018 0.09 Mn is expected to top over
Q4 2017 0.08 Mn 1 million, putting it on
par with competitor
Q3 2017 0.06 Mn
Monzo.
Q2 2017 0.05 Mn

98
Starling Bank – Setting up a Bank With
No Legacy

Expansion Achievements
Starling Bank is looking to expand in Europe, starting In 2018, four-year-old mobile bank, Starling Bank, won
with France and Germany first. Starling Bank has Best British Bank and Best Current Account 2018 for
reassured customers worried about the outcome of Brexit its personal account. Self-described as banking for
that they will still be operational and fully functional. ’mobile living,” Starling Bank offers money management
Previously, the bank had stated that it would establish a tools, flexible card controls, and 24/7 customer service
subsidiary in Ireland ahead of Britain’s departure from the support all through its app and on the go. The personal
European Union. The bank already has employees outside account, for instance, helps customers keep track of their
the U.K. and expects to more than double its workforce in spending habits similar to Mint.com or other financial
2019. Starling Bank also services 20 large clients, planning apps, manage overdrafts, and more. The account
including the UK government, other banks, and is fully accessible via the app. Starling Bank also offers a
corporations via its Payment Services. fully functional, contactless Mastercard debit card, options
for direct deposit, and works with Apple Pay, Google Pay,
Samsung Pay, and Fitbit Pay. Protected by the FSCS,
Starling Bank follows all necessary banking regulations
and is fully licensed by the Financial Conduct Authority
(FCA) and Prudential Regulation Authority (PRA). Starling
Bank does not operate any physical branches and costs
significantly less to operate than traditional banks. The
bank has noticeably fewer fees and does not penalize
customers for declined transactions, like traditional banks.
Starling Bank operates solely from its mobile app.

99
Case Study II:
Nubank: A Brazilian FinTech
Worth $10 Billion

100
Nubank: A Brazilian FinTech Worth $10
Billion

Nubank can be considered as one of the

true disruptors for its value addition to
the Brazilian banking customers who
have been squeezed too hard by the
oligopolistic banking industry in Brazil.

In July 2019, Nubank was estimated to

be valued at $10 billion, making it the
most valued private technology
company in the Latin American region.

To put this in perspective, Nubank’s

valuation is now almost three timesthe
size of Europe’s most valued neobank
N26.

Nubank’s Growth Story

Founded in 2013, Nubank is a Brazilian FinTech startup in Brazil. Nubank’s product and service offerings include
that has emerged as one of the largest challenger credit cards, digital savings accounts, and the recently
banks in the region. It took just six years for Nubank to hit launched consumer loan service. Nubank has also
$10 billion in valuation, raising $820 million in six funding planned digital account offerings for small-business
rounds and acquire approximately 12 million customers owners.

101
102
Nubank’s Strategic Direction

Credit Card Business Digital Accounts

Initially, Nubank only targeted young, wealthy To expand the client base to accelerate growth, the
individuals, and applicants had to be referred by company is expanding its offerings, including digital
existing users. This premium-customer-only offering checking accounts and business accounts. For
worked for Nubank and helped the company to be digital accounts, the strategy was to target young
one of the largest FinTech companies in Brazil with individuals who do not have much money and lacked
no significant spend on the marketing, based on a sound financial literacy in terms of savings methods
member-get-member scheme where users refer the to earn interest income. The prevailing high fixed
app to friends. fees charged by Brazilian banks and the
inconvenience of getting things done from a bank
Nubank’s credit card mobile application, which branch served as the essential ingredients for young
enables expense reporting, GPS, convenient daily consumers being attracted to Nubank. Its NuConta
limits setups, and real-time transaction monitoring, account offers zero annual or maintenance fees,
was a hit with young consumers. Demographics has interest on deposits, unlimited free transfers to any
served as an enabling factor for Nubank’s fast bank, and a debit card for payments & withdrawal.
growth. Nearly half of Brazil’s population is under 30 However, it charges a fee of R$6.50 for using its
years of age who are willing to pay for not having to debit cards for withdrawal, which is currently
visit banks. According to Nubank, 72% of its users available on two external networks.
are under 36 years old.
Lending
Nubank is working to increase the acceptance ratio In 2019, it started to offer loans through its mobile
of applications. In 2017, Nubank’s acceptance ratio application. The approved loan amount is
of all card applications was at only 19%. It planned to immediately transferred to the clients’ NuConta
relax some of its credit check models to improve its account. As per the initial media mentions about the
acceptance ratio. To build its scoring models, plan, loans were first to be offered to 600,000 credit
Nubank established a process to collect data from card customers and NuConta account holders in the
public platforms containing consumption patterns, first few months of the product launch.
delinquency history, and credit profiles.
Furthermore, in 2018, the company implemented Corporate Accounts
facial biometrics tools to improve the security of its Nubank’s next move is to launch digital accounts for
digital onboarding process. small-business owners with the aim of expanding its
product portfolio beyond individuals. To make its
Nubank used to quickly approve credit card offering attractive, it is inviting entrepreneurs to test
requests, decline it, or a large number of its out its new small-business bank account solution for
customers were put into its ‘maybe’ category – the free.
so-called waiting list. Recently, Nubank announced
that it was going to automate the entire process and
end the waiting list for credit cards. We can
expect a sizeable increase in the number of its credit
card customers this year.

In January 2020, Nubank announced that it had over

20 million customers, including credit card and
digital account users, becoming the largest digital
bank in the world outside of Asia.

103
Nubank: A Brazilian FinTech Worth $10
Billion

Nubank has achieved

exponential growth in the
number of customers –
from 1.3 million in 2016
to reported 20 million as
of January 2020. While
initial growth can be
attributed to it its credit
card offering, the recent
growth spurt can be
witnessed in its customer-
focused digital accounts.

Nubank’s initial funding

was used to fulfill the
collateral requirements
associated with a credit
business. Interestingly,
Nubank did not spend
anything on the marketing
of products for more than
two years since its
inception.

104
Nubank’s Revenue Streams

• Nubank is not walking on the path of Revolut or unpaid balances. Its digital accounts are set to
Starling, which focuses on multiple FinTech generate interest income from investments, and it
partnerships to build a marketplace like the banking charges fixed fees every time its debit card is used to
business. Nubank is building its own product withdraw money.
portfolio from scratch, one at a time.
• In 2019, Nubank started lending to businesses that will
• Nubank generates revenues through interchange fees enable the bank to circulate deposits and earn more
whenever its card is swiped. It gets foreign exchange interest income from lending.
fees for international transactions and interest on

Financial Performance – Nubank

Nubank’s Revenue vs. Net Income

(Values in Brazilian Real (R$) Million)

• Nubank’s revenues have continued to grow since decline – it registered R$117 million in losses in FY17.
its inception. In FY17, it generated R$218 million, In FY18, despite the push for accelerated growth, the
registering 183% in YoY growth. In FY18, its revenue company managed its losses better and reduced its
more than doubled to R$471 million. losses from R$117 million in FY17 to R$100 million. Its
efficiency ratio improved from 127% in FY16 to 65% in
• Nubank is in an expansion phase and incurs high costs FY17, indicating improved expense management
& expenses. Its net income has continued to while scaling up.

105
Nubank: A Brazilian FinTech Worth $10
Billion
Profitability Prospects

• Recent regulatory changes and banking license approval should allow Nubank to transform into a full-service digital
bank seamlessly. Given its strong brand recognition and attractive platform, Nubank would be able to capture a
significant amount of cheap deposits, significantly reducing its funding costs. Earlier, Nubank was not allowed to
capture client deposits; thus, it funded its entire operation through securitization of receivables and debt. Going
forward, Nubank is likely to remain in the expansion mode, which would keep it from profitability, and its recent funding
will provide the necessary fuel for this growth.

Geographic Expansion: Opportunities in Latin America

Mexico Argentina
Nubank announced that it would be expanding to Mexico, Nubank has also announced its plans to start its business
where it plans to launch credit cards later this year. The in Argentina. It aims to have 300 employees in Argentina
office is planned to start with 20 employees, with the goal by the end of 2020. According to Moody’s, Nubank’s entry
of expanding the staff size to ~80 by the end of 2019. into the market will increase the competition. Notably,
Mexico presents similar dynamics and market 50% of the population in Argentina is unbanked
opportunities for Nubank. Nubank’s Founder, Velez, (according to World Bank data). Also, the credit
explained the rationale, saying, "We’ve been studying the penetration in Argentina has been on pause for the last
Mexican financial system for a few years, and we heard half a decade. Nubank is likely to create a ripple in the
from a lot of customers about the challenges and banking landscape of Argentina as well. However,
headaches they face with existing services. These Argentina can present some challenges from credit card
services have forgotten to put the consumer at the center issuers such as Tarjeta Naranja, Banco de Galicia, and
of their strategy and their products. On top of that, more Banco Santander, which hold major credit card market
than 36 million Mexicans currently don’t have any access shares in Argentina.
to the bank system – and we want to contribute to this Since 2017, Nubank has had a technology hub in Berlin,
situation to change.” Germany, focused on infrastructure and data engineering.
This lab is mainly used to hire engineering talent, which is
a shortage in Brazil.

Conclusion

• Nubank’s growth from zero to a $10-billion-valuation business with 12 million customers within six years since inception is
an impressive success story.

• If we think from the banks’ perspective, incumbents need to get their digital strategy right or risk losing a significant number
of customers to disrup tors like Nubank. Generic products, which are the bulk of banks’ portfolios, need to evolve into very
specific, client-tailored, and risk-based prices. Graduating from the current "clicks-and-bricks" model is also something
that banks should consider not just survival but efficiencies. Another challenge for established banks – and maybe the
hardest of all – is to develop a unique digital identity. If we understood the signals right, Brazilians are not very happy with
the way banks have operated and served them historically.

• All said, analysts suspect that the rate at which lending spreads and overall banking fees fall in Brazil over the next couple of
years will surprise many market participants. Nubank is already a revolution in Brazil, where it has 12 million customers that
enjoy much better services and rates today. An environment of complacency towards customer service and sky-high rates
by traditional banks will continue to help the challenger Nubank in Brazil in the near-term. Beyond Brazil, Nubank’s venture
into Mexico and Argentina would open new channels for growth for the company.

106
Segmented Analysis of
Leading Global
Neobanks
Competitive Analysis of
Neobanks

107
Competitive Analysis of a Few
Prominent Global Players

Breadth Funding Valuation No. of FINTECH License Global APIs ATM

of Users Partner- Expansion Withdrawals
Services ships

 ✓

✓ ✓

✓ ✓

✓ ✓

 ✓

✓ 

✓ 

✓ 

✓ 

✓ ✓

✓ 

✓ 

 ✓

 

✓ ✓

108
Neobanks Serving the
Underserved Economy
• Value Addition by Neobanking Players in Underserved
Customer Segments
• Case Study
o WeBank: Serving The Underserved Economy in China

109
Neo Banks: Serving the Underserved
Economy
Neobanking growth story is not a fiction, which is evident if we look at the success stories and
value addition by neobanking players in many underserved customer segments:

• SMEs: Neobanks seem to be the right fit in addition to • Millennials: Neobanks/digital banks have indeed
being capable of solving financing problems for SMEs. made an impact in the consumer banking space with
Neobanks provide a wide range of services from their great UI/UX and agile approach to banking. The
ground-up capabilities around trend suggests that millennials are looking for lifestyle
accounting/tax/payments, etc., to API-driven experience from their banks that involves unique
marketplaces. These services enable SMEs to credit/debit cards, investment solutions, and app-
integrate plug-and-play solutions of their choice that based banking that gets things done in four clicks.
were earlier available to larger institutions with deeper Neobanks are better placed to meet the expectations
pockets. SME-focused neobanks have started to of this customer segment, and it is evident is
make an impact. Upcoming neobanks in Asia-Pacific unprecedented customer growth stories of many
are inclined towards the SME segment, and we can European banks. We can expect this trend to continue;
expect more neobanks beginning to provide tailored customers new to banking will be attracted to
banking services to this segment in the years to come. neobanks across the globe.

• New to Credit Customers: The thin-file or new-to- • Two of the sectors that these neobanks have
credit customers are largely ignored by traditional specifically started to target: SME and Gig economy.
banks. On the other hand these thin-files are Challenger banks have indeed made a mark on the
considered as ’opportunity files’ by neobanks. consumer banking space with their great UI/UX and
nimble, agile approach to banking. The idea, when
• Gig Economy: The global gig economy market applied in the SME context, seemed to tick most of the
stands at $248 billion (gross volume) with projected boxes for SMEs, solving many of their burning
growth of 17.4% during through 2023. Today’s gig problems. These digital-only banks provided a range
economy workers are looking for solutions that of services – from ground-up capabilities around
support an increasingly flexible work pattern that accounting/tax/payments, etc., to API-driven
includes unpredictability of deposits in their accounts. marketplaces enabling SMEs to plug-and-play
Unlike the brick-and-mortar establishments set up by solutions of their choice on their banking platform.
traditional banks, Neobanks are better placed to
leverage this knowledge to design solutions that can • While neo banks such as Open (bankopen.co) provide
cater to this customer segment. They endeavor to an inbuilt accounting capability with a payment
integrate all of these components and seamlessly offer request and invoicing feature, Starling Bank enables
customers the chance for self-service, education, SMEs to plug in services of their choice – e.g., Xero for
advice, and transactions and more through a simple receivables, TransferWise for cross-border payments,
app. Current trends indicate an uptick in the number Kabbage for lending, Sage for tax, etc., Some banks,
of such players providing services of value to the fast- (e.g., Kontist) are focused purely on freelancers.
growing gig economy across the world.

110
Banking in the Digital-First World
A New Reality for SME Banking Courtesy Challenger Banks

No. of Digital-Only Banks with SME-Focused Offerings

4+

9+
31+

8+

APAC
Bank

Europe leads the way in the transformation of SME banking through challenger
banks, with more than 21 providers enabling SMEs in their banking experience.
The Americas follow with 8 SME-focused challenger banks. Asia had more than 6
challenger banks serving SMEs, while the rest of the world had 2 such providers.
111
Case Study:
WeBank: Serving The
Underserved Economy in China

112
WeBank: Serving The Underserved
Economy in China
The Rise of WeBank

Lets have a look at China’s first digital-only bank –

WeBank. The timing of WeBank’s launch in 2014 was What has also helped is that by 2017, according to
almost impeccable – according to a report on China’s the World Bank Group, 80.2% of adults in China had at
FinTech sector, it was right in sync with the wave of the least one bank account, and 67.9% of the population
fast-growing middle class (>300 million), high made or received digital payments. On the other hand, by
smartphone penetration (>700 million), and over 50% the same year, only 22.7% had obtained funding from
of GDP in the service sector which is R&D-focused, along financial institutions or used a credit card, making a
with the huge population in China (58% in urban centers). mobile alternative attractive.
And this is the best part: WeBank had unfettered access
to WeChat’s massive database of users, solving for one of Then, there are the security features that made it such
the most basic teething problems an all-digital bank an attractive proposition for users. The registration
would tend to face. There are over 1.2 billion users process to open a WeBank account includes presenting
registered on these platforms, the data of which is personal information, a phone number, and an active
available for WeBank as well – this lets the company debit card issued by a traditional bank. In addition, the
appraise its customers’ credit risk more efficiently, platform asks the user to provide a voice sample and
allowing it, in turn, to offer more personalized products. register their facial features.

Auto Loan Smart Retail Personal Finance

Management
for Underbanked
Population 113
WeBank: Serving The Underserved
Economy in China

Timeline-wise, WeBank found the right kind of

opportunities and secured its banking license in
December 2014, setting up its online banking
services in 2015.

It then launched microloan products, scaled up

through capital raising, and achieved profitability
in 2016. The very next year, in 2017, it started
providing SME loans and cross-industry
partnerships.

Flagship products developed by WeBank include

WeiLiDai and the WeBank App. WeiLiDai provides
revolving credit with flexible repayment plans and
daily interest rates (DIR) charged at 0.02–0.05%,
while the WeBank App provides wealth
management products that have higher returns and
better liquidity. WeiLiDai is focused on the under-
banked population. At present, WeBank also offers
the WeiCheDai Auto Loan as a product, enabling
users to get automobile loans easily.

Among the core technologies that drive WeBank’s

products are artificial intelligence (AI),
blockchain, cloud computing, and Big Data.
When it comes to FinTech, the focus is on five core
value factors, namely, efficiency, user experience
(UX), scale, cost, and risk, to derive optimization.
Contrary to banks that begin as multichannel
(Banking 1.0), WeBank is presently at the stage of
banking without a bank (Banking 3.0) and is now
focusing on the next stage, which is Banking-as-an-
Experience (Banking 4.0).

114
WeBank: Serving The Underserved
Economy in China

The reason for WeBank’s growth

growing at such a tremendous pace
isn’t just access to the WeChat user
database. It has a product suite that
includes some highly innovative
products and includes service
offerings that are ideally positioned
to connect and serve a whole range
of customers, from the urban techno-
savvy elite to the rural and semi-
urban underserved population, to
other banks and service providers
themselves.

Over 41.4% of the total MSMEs (over

73 million) in China fall under the
category of businesses with financial
constraints, presenting a vast, untapped
market for FinTech players – serving as
the perfect target market for WeBank.

115
WeBank: Serving The Underserved
Economy in China
Innovative products and services offered by WeBank:

Offering the Platform-as-a-Service all sides in just a few seconds. WeBank has been running
WeBank’s clients are based in China’s city commercial real-life blockchain applications on top of its underlying
and agricultural hotspots, mainly the Tier 3 and 4 platform called Blockchain Open Source (BCOS), which is
segments. These clients want to grow their markets and developed in house. One of WeBank’s major applications
have a large, loyal, and stable customer base but don’t of blockchain technology is its interbank
necessarily have the needed technical expertise and reconciliation platform for its microloan product WeiLiDai,
human resources. Accordingly, WeBank has increasingly which is inserted into the WeChat app.
exported its platform and technologies as a service to
other banks in the Chinese market. Its platform Simplifying background checks (remember, it already has
’WePower’ is packaged as a suite of software WeChat’s users’ database), consumers can get a quick
development tools, allowing partner banks to embed loan in just minutes, of up to $31,000 (USD) without any
capabilities in their apps. It enables partners to access AR, credit checks.
AI, and internet analytics by integrating WeBank’s SDK to
their own app, leading to a reduction in overall costs. Towards Open Banking & Financial Inclusion
With all these innovations, what’s next for WeBank?
Providing AI-Enabled Customer Service Recently, it teamed up with Tencent’s cloud platform to
WeBank seeks to use AI in customer service to automate launch a new FinTech research lab. The establishment of
processes and improve services. According to a WeBank the ’Tencent Cloud – WeBank FinTech Innovation Lab
executive, users talk to Siri or Google Assistant on their was announced at a press conference in Beijing on March
mobile devices frequently. With over a million requests 29 this year.
coming in every day, he said, almost all of them – 98% –
were handled by robots. The executive noted that By engaging in cooperative research, connecting
customers are very satisfied with the use of robots to individuals & enterprises, and pushing towards the
meet their banking needs, and WeBank intends to bring development of FinTech applications directed at Open
this experience to its users as well. Banking scenarios, WeBank’s goal, going forward, is to
help financial institutions create the right kinds of FinTech
Leveraging Blockchain Technology for Micro-Loans services, driving the development of financial inclusion.
Traditionally, banks had to each keep their own records of
every transaction and check each other’s books. However,
as we know, with blockchain technology, information is
encrypted on one network and updated simultaneously on

116
The Era of Digital-Only Banking

Clearly, neobank fever is spreading around the globe. This has been made evident by:

1. Investments: We have seen remarkable rounds of investments in the independent neobanks in the
past few years. Most of these investments were boosted by unicorn funding rounds like OakNorth,
Nubank, Judo Bank, Revolut, Monzo, and N26.

2. Players: There has a significant rise in neobank players over the years. Even though startup activity in
this space started around 2004, they gathered pace after 2011. Around 50% of the startups were
founded in 2016 and 2017, which is a clear indication of how these players have been disrupting the
traditional banking space.

3. Customer Growth: It is projected that by 2023, Europe’s neobanks will win up to 85 million
customers, reaching over 20% of the population over the age of 14. Similar predictions can be made
for markets like the US, Singapore, Australia, India, and Brazil, which could be proven to be the next
battleground for neobanks.

“ Banking is necessary, banks are not.

— Bill Gates
Founder, Microsoft Corporation

The Neobank fever is spreading around the globe. This can be inferred primarily
from the growth that we have witnessed in this segment in terms of an increase in
investments, the number of players, and customer growth. The growth story of
Neobanking is not fiction, which is evident if we look at the success stories and
value addition by neobanking players in many underserved customer segments:

117
Counter Maneuver by
Traditional Banks:
Digital-Only Initiatives
• Digital Only Initiatives by Traditional Incumbents
• Global Analysis of Incumbent Bank’s Standalone
Mobile-First Offerings
• List of Digital-Only Initiatives by Banks
• Where Banks Have an Edge
• Case Study: JP Morgan – Failure of Finn
• Stakeholder in Neobanks – Is it the Right Way?

118
Characteristics of Neobanks

Digital-Only Initiatives

These are stand-alone, mobile-only banks created by traditional banks; they use new-
age technology to deliver products and services in a customer-friendly manner. These
digital banks use completely different technology platforms compared to their parent
banks, thereby fast-tracking the overcoming of hurdles associated with legacy
architecture. They are targeted at the tech-savvy, millennial customer segment, as well
as to provide best-in-class innovative banking services.

Licensed Banks

These are digital-only banks which have obtained a fully operational banking license.
This enables them to offer products and services on their own, rather than through
licensed banks. It also enables them to have an improved core banking platform that
allows for smoother integration with external service providers they may choose to tie up
with. Cost of customer acquisition is comparatively much lower as they acquire
customers only through digital channels. With no legacy infrastructure issues and agile
core banking platform, the cost of a product launch is cheaper and time to market is
faster. Some of these banks may still continue to offer services in partnerships with
banks and other FinTech companies. They may also continue to operate as
marketplaces.

Over The Top

These are digital-only platforms that don’t have their own banking licenses. These
platforms offer either a stand-alone product or a bouquet of financial products in
partnerships with financial institutions/banks and FinTech firms but at a cost quite lower
than of traditional banks. Some of them act as marketplaces for financial products. They
often take the API route to connect their customers to services provided by various
players. These players usually differentiate themselves by offering unique features/VAS
to their customers.

119
Digital-Only Initiatives by Banks

Contrary to popular notion, digital/online banks aren’t a endeavor: a standalone digital banking offering that is
new trend. Since the 1990s, incumbent banks have entirely mobile-first, or even mobile-only.
launched online-only banks that offered banking services
via internet/mobile/tele-network channels. Between 1997 Why launch a digital-only offering?
and 2019, there have been several traditional banks The primary reason for diversifying banking experience
coming up with separate digital banking app/brand/tech within a bank is the rapidly changing consumer
platforms for customers as a new standalone bank. ING is preferences. Customers globally are looking for new
one of the first banks that launched a direct banking banking experiences, and mobile became the platform to
service called ING Direct to customers with a deliver those experiences. There is another important part
branchless model. It was very successful in Canada, and of the push towards taking control over the unprofitable
ING expanded its services to other countries, including demographic:
Australia, the United States, France, Spain, Germany,
Italy, and the United Kingdom. For traditional banks that • The necessity to capture this 18-35 customer
are trying to change themselves, they find that the digital segment and lead them early on with the goal to
transformation process is a long-drawn exercise that cross-sell higher-margin financial products in the
involves cultural change and organizational change apart future, as their needs evolve.
from just the technology changes – this makes it not only • Innovation adoption: There is a limit to which a team
a hard nut to crack, but a multi-year endeavor and of thousands of IT professionals that build and
something that costs a lot. Any evolution requiring maintain existing infrastructures can be flexible, and
multiple and varied changes to be made takes a banks found it faster and easier to launch separate
significant amount of time and money when it comes to entities – starting from a clean slate – to be
legacy institutions and their systems. Even then, the competitive and squeeze out overly competitive
impact of the outcome is not certain or guaranteed. It may startups.
just happen that by the time you finish your digital
transformation exercise, the best-in-class has moved the Launching a digital-only offering became a no-brainer for
industry even further. As traditional banks are still figuring a growing number of institutions across regions, including
this out, they often find an innovative plan B that can be Europe, North America, Asia, etc.
run in parallel – not as an alternative, but as a separate

Note: Values as of 2019 120

Digital-Only Initiatives by Banks

Goldman Sachs launched a digital bank under the Customers Bank launched BankMobile, which offers no-
brand name of ’Marcus by Goldman Sachs.’ With this fee savings and checking accounts for underbanked and
initiative, the financial institution wanted to move into the middle-income households. Since its inception, it has
retail banking space. It is an online platform that offers opened around 2 million accounts from nearly 800 colleges
no-fee personal loans and high-yield savings accounts to and universities across the US. The bank claims that it
consumers. It also recently launched its services in the UK opens about 300,000 new accounts each year.
and opened more than 50k accounts as of October 2018.
B by Clydesdale Bank & Yorkshire Bank was launched
BNP Paribas launched Hello bank! in France in 2013. It in the UK in 2016. It offers customers a current account
is a mobile-first bank offering account services and other that pays interest on balances up to £2,000, as well as an
banking products. Currently, the bank operates in six instant savings account. It also provides both debit and
countries: France, Germany, Italy, Belgium, Austria, and credit cards, incorporating Touch ID, Apple Pay, and
the Czech Republic. It has opened around 3 million Android Pay.
accounts as of now.
811, a standalone offering by India’s Kotak Mahindra
DBS Bank launched digibank, which provides its Bank, was launched in 2017. 811 provides customers with
banking services mainly on a smartphone app. digibank a digital banking account with multiple benefits, including
was first set up in India and currently serves 2 million+ zero balance, 6% interest, and a virtual debit card on one’s
accounts holders. DBS Bank has recently launched smartphone.
operations in Indonesia.

Incumbent
Banks’
Standalone
Fresh
Mobile-First
Offerings

121
List of Digital-Only
Initiatives by Incumbents

122
List of Digital-Only Initiatives by
Incumbents (1/2)
Region Parent Digital-Only Country Founding
Organization Entity Year

Wells Fargo Greenhouse US 2018

JP Morgan & Chase Finn US 2017
Customers Bank Bank Mobile US 2015
Americas
Green Dot Bank GoBank US 2014
Goldman Sachs Marcus US 2016
CIBC Simplii Financial Canada 2017
Capital One Capital 360 US 2013
Scotiabank Tangerine Canada 2014
Agibank Agibank Brazil 2017
Bradesco Next Brazil 2018
Equitable Bank EQ Bank Canada 2017
Cadence Bank Allegro US 2009
Bank Purely Flushing Bank US 2015
BNP Paribas Hello bank! France 2013
UniCredit buddybank Italy 2018
Clydesdale Bank &
B UK 2016
Yorkshire Bank
ABN Amro MoneYou Netherlands 2001
Societe Generale Boursorama Banque France 1995
Europe BNP Paribas Nickel France 2014
Crédit Mutuel Fortuneo Banque France 2009
AXA Soon Banque France 2013
Mediobanca CheBanca! Italy 2008
UniCredit FinecoBank Italy 1999
Bankinter COINC Spain 2012
Caixa Bank imaginBank Spain 2012
Santander Open Bank Spain 1995
HSBC First Direct UK 1989
Royal Bank of Scotland Bo UK 2019

Oceania Bendigo and Adelaide Bank (Up) Up Australia 2018

NAB (UBank) UBank Australia 2008

ING ING Direct Australia 1989

123
List of Digital-Only Initiatives by
Incumbents (2/2)
Region Parent Digital-Only Country Founding
Organization Entity Year

Middle Mashreq Bank Neo UAE 2017

East Emirates NBD Liv UAE 2017
Bank Leumi Pepper Israel 2017
Gulf International Bank meem Bahrain 2014
Commercial Bank of Dubai CBD Now UAE 2016
India &
DBS Group Digibank 2016
Indonesia
State Bank of India Yono India 2017
Kotak Bank (Kotak 811) Kotak 811 India 2017
Asia & Africa CITIC Bank and Baidu aiBANK China 2017
WEMA Bank ALAT Nigeria 2017
Halyk Bank Altyn-i Kazakhstan 2016
KB Kookmin Bank Liiv KB Cambodia Cambodia 2017
CIBC Bank & Baidu Baixin Bank China 2015
New Hope Group &
Xin Wang Group China 2016
Xiaomi
BTPN Jenius Indonesia 2017
SMBC Japan Net Bank Japan 2000
KDDI and Mitsubishi UFJ Bank Jibun Bank Japan 2008
Rakuten Bank Rakuten Japan 2000
SBI Holdings and Sumitomo Mitsui SBI Sumishin Net
Japan 2007
Trust Bank Bank
Sony Sony Bank Japan 2001
Korea Investment Holdings and
Kakao Bank Korea 2017
internet company Kakao
OTP Bank Touch Bank Russia 2015
Cathay United Koko Taiwan 2017
Taishin International Commercial Bank Richart Taiwan 2016
VP Bank TIMO Vietnam 2016
Vietnam,
CIMB Octo 2018
Philippines
African Rainbow Capital TymeBank South Africa 2015
UOB TMRW Thailand 2019

In the next year or two, we are further going to witness a significant shift in the digital banking
landscape with more and more banks launching their own digital-only initiative and thereby
putting pressure on the independent neobanks across various regions.
124
Core Platforms Used By Digital-Only
Initiatives
• As trends indicate, several digital-only brands of traditional financial institutions have preferred to go with
seasoned core banking platforms.

• This can be attributed to factors such as incumbency, availability of baked-in localization & compliance, and the
credibility of a trusted rollout partner (the likes of Accenture, IBM, and Capgemini).

Core Platforms Digital-Only Banks

(Finacle) (Goldman Sachs)

(Transact) (Santander)

(State Bank of India)

BαNCS

(FLEXCUBE) (Lloyds)

(Oracle Banking Platform) (National Australia Bank)

125
Digital-Only Initiatives: Region-Wise
Analysis
The region-wise break-up shows the maximum concentration of these
digital-only initiatives by incumbents banks is in America, followed by
Europe and Asia.

In North America, banks/FIs that have launched their In Europe, the banks/FIs that have started their own digital
own standalone digital banks are Wells Fargo banks are RBS (Bó)*, Hype (Banca Sella), BNP Paribas
(Greenhouse), JP Morgan & Chase (Finn), Customers (Hello bank!), UniCredit (buddybank), Banco Santander
Bank (BankMobile), Green Dot Bank (GoBank), Goldman (Openbank), Clydesdale Bank & Yorkshire Bank (B), ABN
Sachs (Marcus), CIBC (Simplii Financial), Capital One Amro (MoneYou), CaixaBank (imaginBank), OTP Group
(Capital 360), Scotiabank (Tangerine), Republic Bank & (Touch Bank), and AXA Bank (Soon).
Trust Company (MemoryBank), and Flushing Bank
(BankPurely). In the Middle East, the top banks/FIs that have set up their
own digital banks are Mashreq Bank (Mashreq Neo),
In Asia & Africa, the banks/FIs that have launched their Emirates NBD (Liv.), Bank Leumi (Pepper), Gulf
own digital banks are DBS (digibank), State Bank of India International Bank (meem), and Commercial Bank of Dubai
(Yono), Kotak Bank (Kotak811), CITIC Bank & Baidu (CBD Now).
(aiBANK), VP Bank (YOLO), UOB (TMRW), WEMA Bank
(ALAT), Halyk Bank (Altyn-i), and Standard Chartered In Oceania, banks/FIs that have launched their digital
Bank. banks are Bendigo and Adelaide Bank (Up), and NAB
(UBank).

Incumbent
Banks’
Standalone
Fresh Mobile-
First
Offerings
• Unlike the USA and Europe, the digital-only initiatives • However, most of these digital banks, most digital-only
in Asia and the Middle East have been set up in a players in Asia and the Middle East and Africa, are
relatively short period of time (2-3 years), with the not independent and are backed by traditional
exception of Japan and Australia. incumbents like Jenius, Tyme, Timo, Kakao Bank, and
• Japan was one of the earliest trendsetters in terms of Kotak811.
launching digital-only banks like Jibun Bank (a joint • Another popular trend that has been witnessed is some
venture between Bank of Tokyo-Mitsubishi UFJ and the of these challenger banks are a spinoff of popular
mobile network operator, KDDI. Similarly, in Australia, messaging applications like Kakao Talk in Korea.
ING and UBank launched their digital platforms in 1999
and 2008, respectively. 126
Emergence of Digital-Only Initiatives
Over Geographies

2000 to 2014 2015 to 2017 2018 to YTD

AMERICAS EUROPE ASIA • BTPN – Jenius

Indonesia, 2017
• Wells Fargo - Greenhouse • BNP Paribas - Hello Bank • DBS Group - Digibank
US, 2018 France, 2013 India & Indonesia, 2016 • Korea Investment Holdings and
internet company - Kakao Bank
• JP Morgan & Chase - Finn • BNP Paribas - Hello Bank • State Bank of India - Yono
Korea, 2017
US, 2017 France, 2013 India, 2017
• Cathay United - Koko
• Customers Bank - Bank Mobile • Unicredit - Buddy Bank • Kotak Bank - Kotak 811
Taiwan, 2017
US, 2015 Italy, 2018 India, 2017
• Taishin International Commercial
• Green Dot Bank - GoBank • Clydesdale Bank & • CITIC Bank and Baidu - aiBank
Bank - Richart
US, 2014 Yorkshire Bank - B China, 2017
Taiwan, 2016
• Goldman Sachs - Marcus UK, 2016 • WEMA Bank - ALAT
• VP Bank - TIMO
US, 2016 • ABN Amro - Moneyou Nigeria, 2017
Vietnam, 2016
• CIBC - Simplii Financial Netherlands, 2001 • Halyk Bank - Altyn-I
• CIMB - Octo
Canada, 2017 • Societe Generale - Boursorama Kazakhstan, 2016
Vietnam & Philippines, 2018
• Capital One - Capital 360 Banque • KB Kookmin Bank - Liiv KB
France, 1995 • UOB - TMRW
US, 2013 Cambodia, 2017
Thailand, 2019
• Scotiabank - Tangerine • BNP Paribas - Nickel • Xinwang Group New
Canada, 2014 France, 2014 Hope Group - Xiaomi
• Agibank - Agibank • Credit Mutuel - Fortuneo Banque China, 2016
France, 2009 AUSTRALIA
Brazil, 2017
• AXA - Soon Banque • Bendigo and Adelaide Bank – Up
• Bradesco - Next
France, 2013 MIDDLE EAST Australia, 2018
Brazil, 2018
• Mediobanca - Chebanca • Mashreq Bank – Neo • NAB – Ubank
• Equitable Bank - EQ Bank
Italy, 2008 UAE, 2017 Australia, 2008
Canada, 2017
• Unicredit - FinecoBank • Emirates NBD – Liv • ING - ING Direct
• Cadence Bank - Allegro
Italy, 1999 UAE, 2017 Australia, 1989
US, 2009
• Bankinter - Coinc • Bank Leumi – Pepper
• Bank Purely - Flushing Bank
Spain, 2012 Israel, 2017
US, 2015
• Caixa Bank - Imagin Bank • Gulf International Bank – Meem
Spain, 2012 Bahrain, 2014
JAPAN • Santander - Open Bank • Commercial Bank of
• Rakuten Bank Spain, 1995 Dubai - CBD Now
Japan, 2001 UAE, 2016
• HSBC - First Direct
• Jibun Bank (BTMU/KDDI) UK, 1989 • Pepper – Bank Leumi
Japan, 2012 Israel, 2017
• Albaraka – Insha
Istanbul, 2018
• RBS – Bo
UK, 2018
127
Case Study:
JP Morgan’s Finn: One Birthday
Down, No More To Go

128
 JP Morgan’s Finn: One Birthday Down,
No More To Go
Ever since its opening in 1871, JP Morgan has remained a Finn was targeted at young adults who wish to do
valuable and reliable player among the top brands in the transactions on phones rather than visiting branches. The
banking sector. So, when JP Morgan announced the app came with auto-saving features, smart budgeting
launch of their digital-only bank, Finn, it was assumed tools, and emojis to enhance the experience of millennials.
that the innovative offering would be the new paradigm for Moreover, to acquire customers, JPMorgan offered $100
incumbent banks; especially given that the bank designed to people who opened accounts and completed 10
it in-house by working closely with millennials for more transactions of certain types. It was seen as an add-on to
than a year to understand their unique money providing regular branch-based accounts.
management and banking-related
behaviors/requirements. Competitors like Wells Fargo and Goldman Sachs are
also promoting digital offerings under separate
They conducted trials for nine months in the state of brands. After all these efforts in product development and
Missouri (USA) before they rolled out the app. No wonder given similar offerings by other competitors, the closing of
it came as a shock to the financial community when the Finn by JP Morgan comes as a surprise move. JP
bank shut down Finn within just a year of its launch. The Morgan alerted Finn customers on June 6 that it will port
question that has intrigued many in the industry remains – over their accounts to Chase on August 10. Monthly fees
what went wrong? In this article, we try to analyze from our will be waived indefinitely for Finn customers, and account
viewpoint. numbers will not be required to change.

When you download Finn, you can set up a Create personalized rules to Rate your Check your monthly Because your bank should
checking and savings account right in the app, autosave for things that purchases to see spending trends, decide help you handle your
do all your classic bank stuff, and use some matter to you. how you really feel what you can improve, money, we’ve got the
brand new tools to help you take charge of about the way you and start to spend classic bank stuff you
your money. spend. smarter. expect and some new tools
to make it better.

Source: JPMorgan Chase Bank, NA.

129
JP Morgan’s Finn: One Birthday Down,
No More To Go
Reasons that could have led to the shutdown of Finn:

1. A futile attempt to lure millennials: The Finn app features into its main banking app. This shows that
was launched with a lot of emojis to attract millennials. customers of Finn did not feel the need to have a
The customers had the option of sharing their feelings separate brand for meeting their banking
about a purchase through emojis. Over time, requirements. More than half of Finn’s customers
customers could access a report which shows the also have a Chase account.
motivation behind their spending habits. By shutting down Finn, JP Morgan is also removing
However, this feature did not resonate with millennials some mix-up in product usage. While the Finn app was
who use such emojis on every other app. To them, it targeted at digitally savvy millennials, the customers
appeared like a futile marketing attempt with nothing still had access to Chase physical locations for more
new to appeal to customers. Clearly, one of the key complicated services. In short, both the brands were
lessons here is to have a well-differentiated product offering similar types of services.
offering for a parallel brand to exist & thrive.
4. Diminished need for a digital-only brand: Chase
2. Competition from FinTechs/Challenger has been focusing on increasing its physical presence.
Banks: According to estimates from Cornerstone Last year, the bank announced it would open 400 new
Advisors, Finn managed to sign up just 47,000 branches in new markets over the next five years.
customers since inception. According to another There was another announcement this year that the
estimate, Chime had 3 million customers as of Q2 bank expects to open up to 90 new branches in new
2019, and BankMobile (US) has over 2 million account markets by the end of this year.
holders.
Another example could be Goldman Sachs’ Marcus, Clearly, the focus is on opening new branches. With
which offers US customers one of the best interest new branches catering to new markets and Chase’s
rates in the country. Finn did not provide its main banking app as support, there is a diminished
customers with features that they could not get with need for a separate digital-only brand. This move by
any other brand. JP Morgan to shut down Finn has already given rise to
much debate about whether similar units of traditional
banks could meet with the same fate. Despite having
3. Both Chase brand and Finn brand competing with garnered close to 50,000 customers in the year it was
each other: According to a JP around, Finn couldn’t survive in the long-term. Having
Morgan spokesperson, The Chase brand is already said that, and despite certain commonalities, different
among the most popular banks for millennials, so digital banks tend to offer unique services that
we’re leaning in on that, rather than continuing to build distinguish them from their competitors.
a brand from scratch. Moreover, Chase has already
incorporated parts of the Finn app, like auto-saving

Could this be key to big banks’ survival over time? It remains to be seen! For the time
being, we continue to engage in discourse on what could be done differently for big
banks to go completely digital. This has led to a lot of speculation about whether it’s
possible, at all, to run a truly disruptive business within an incumbent organisation.

130
Stakeholder in Neobanks – Is it the
Right Way?
Sometimes traditional banks that are trying to change However, acquisition of an established neobank may not
themselves, find that the digital transformation process is be a step in the right direction. Over the years, we have
a long-drawn exercise that involves cultural change and witnessed multiple partnerships that proved to be
organizational change apart from just the technology turbulent one in terms of integration and customer
changes thereby making this makes not only a hard nut to acquisitions.
crack, but a multi-year endeavor and something that
costs a lot. Any evolution requiring multiple and varied • E.g. French incumbent BPCE that had bought
changes to be made takes a significant amount of time German digital-only player Fidor, a German digital-
and money when it comes to legacy institutions and their only bank, in 2016, is reportedly looking to sell it.
systems. Even then, the impact of the outcome is not • Another example, is the acquisition of Simple by
certain or guaranteed. It may just happen that by the time Spain-based incumbent BBVA in 2014. The
you finish your digital transformation exercise, the best in incumbent bank took hefty write-downs for the
class have moved the industry even further. neobank a after the $117 million acquisition.
So as the traditional banks are still figuring this out, some
of these banks have started to acquire the independent
neobanks in order to roll out digital accounts for their
customers.

Name Country Key Established

Shareholder

Key Neobanks 2009

Fully or 2009

Partially 2014

Controlled by 2016

an Incumbent 2016

Bank 2017

131
Conclusion
• Incumbent Banks
• Independent Neobanks

132
Conclusion: Incumbent Banks
Incumbent Banks Tackling The Threats Posed by Neobanks:

Incumbent banks have been working on transforming themselves to better cater to their smartphone-wielding audiences as a
way to tackle competition from the rising neobanks. Banks have been focusing on two broad initiatives in their
transformation: digitising back-end processes or exploring the option of setting up separate digital-only, virtual banks to
tackle the threats posed by the emerging neobanks. The modern tendency for digitalization is the key driver for
reconsideration of the ways banks provide their services. The rule for today is the following: the quicker is the adoption of
innovative technologies that ensure higher accessibility of services, the better is the outcome.

There is no denying that traditional banks do lag behind neobanks and tech giants in digital capabilities and often in
customer-centricity too. But the game is not over yet, and they can still fight back. To start with, banks need to examine what
elements they can adopt from digital-only challengers’ strategies. They also need to better leverage the strengths they have
over their fast-expanding competitors. Most importantly, incumbents must learn how to focus on customer needs and
become obsessed with customer focus, just like Amazon, Google, and other platform companies. They should build more on
emotional banking techniques, like reducing customers’ anxiety, to boost loyalty and develop sticky user relationships.
Incumbents should also improve their mobile capabilities, and extensively use data and artificial intelligence tools so they can
wow customers with the speed and quality of their digital offerings.

Adopting agile ways of Embrace partnerships with FinTech

working and redefining and neobanks.
operating models.

Modernize core systems to Focus on the relationship approach

embrace Open Banking and rather than a conventional
AI/ML-driven systems. transaction business.

Customer focus and highly refined

Rebalancing headcounts and
customer journey programs to
skills in the wake of emerging
redefine ways of serving customers
competition and new
with an aim for retention. Relying on
operating models.
baby-boomers for customer loyalty and ignoring
millennials can be fatal to banks.

The banking industry can achieve long-term sustainable growth through its customer-centric mindset. By focusing on
changing consumer needs and behaviours, traditional banks can innovate to disrupt the market and expand market share.
They can compete successfully with smaller digital players by developing a deep understanding of their customers across all
touch points. Armed with this knowledge, they are anticipating needs and providing tailored solutions. It is the way forward.

133
Where Banks Have an Edge
Incomparable customer base, relationships with of important data. As BBA suggests, The vast pool of
households built through generations, established customer data that can be derived from such interactions
distribution infrastructure (digital & physical), access to a means banks can understand more accurately what
vast talent pool, the valuable asset of data generated customers are trying to achieve, and use digital to interact
through decades of operations, are just some of the aces with them in a more meaningful and relevant way to help
banks have always had up their sleeve. Some estimates them make good financial decisions.
suggest that the average US adult has used the same
primary checking account for about 16 years, tempting Access to Talent
someone to switch to a shiny new bank from their Banks have been extremely smart in turning the
traditional financial services provider may present a competitive landscape into a supportive one by rushing to
challenge technology startups don’t have a runway to launch or support innovation labs, incubators, and
overcome. Meanwhile, institutions already have an accelerators. Through these ventures, they gained access
established customer base with their primary offers and to the most talented teams with groundbreaking ideas.
can leverage existing data & customer pools for They have enough funds to financially support the
promotions, tests, campaigns, etc. They can also development of disruptive solutions under their wings and
preselect the most desirable group from the pool of harvest the results.
existing customers to validate the new product or to
ensure they are able to keep potential switchers in their Incomparable Customer Base
network. Above all, financial institutions have an unbeatable
customer base built through generations of satisfied
Established distribution infrastructure clients as compared to neobanks like N26, Monzo, etc.
(physical & digital)
Since banks have been around for a while, they went
through years of growth and development, adjustment
and learning. They have enormous and powerful sales
force and are well-educated in customer service.
Over the years of learning, banks have organized their However, these factors cannot alone
infrastructure in the most efficient way they could to meet
regulatory requirements, to offer an endless array of
assure the success of these initiatives
services to various customer clusters, and in case they undertaken by banks. We have
need a costly restructuring, their pockets are deep enough witnessed where even after months of
to afford that. Moreover, despite the perception that
traditional banks are too old to create disruption in the
groundback and preparations, banks
digital space, again, their pockets and access to the most have failed to sustain their digital-only
skilled talent allow them to learn and adjust in no time. banking approach. E.g., Finn by JP
As for the physical – bank branches are here to stay as
they prove to be of immense importance for the small-
Morgan or Acquisition of Simple by
business community and customers. BBVA, where we witnessed the
incumbent bank took a write-down on
the purchase of Simple bank.
The valuable asset of information
Long-established relationships not only benefit financial
institutions economically, but also generate a vast amount

134
Conclusion: Independent Neobanks
Grown-Up FinTechs Are Turning Into Banks: The Great Rebundling Has Begun

Established FinTech players have begun to realize that at some stage, in order to continue playing a bigger role in the
financial services industry, they will be required to capture a larger part of the value chain; they will need to take away market
share. Therefore, FinTech that has grown to a certain size, has started to pursue a banking license. So far, around 17
FinTechs have become banks!

With a banking license, large FinTech players can have rebundling their service offerings into a bank. Zopa
cheaper access to capital, make money from a float, be on started its banking operations after 13 years of its
the right side of regulation, competitive advantage over founding; Tyro and Klarna each took 12 years to figure
the other FinTechs, and confidence-building in the eyes of out that unbundling has some inherent limitations.
investors & customers, as well as new revenues from new FinTech players realize that getting a bank license can be
offerings such as BaaS offering for other FinTechs. In a key to continue raising money and fuel their ambitions.
some countries, access to key digital infrastructure Becoming a bank opens up the possibilities to invest in the
(eKYC, credit bureaus, real-time payments) is being latest technology with the aim to develop new products
restricted to only banks, but let's not go there as that is and reach customers quickly.
stated to go away (or there are workarounds). A banking
license also helps the FinTechs expand and provide its This trend of shifting the focus from the unbundling of
customers with the complete bouquet of banking services banking service to rebundling provided some signals
(one-stop-shop and not just point solutions) and helps when big names such as Monzo, Klarna, SoFi, Paytm,
them to create a better brand for themselves. With the WeBank, and Tyro Payments started obtaining
above advantages, a banking license could be seen as the banking licenses. Well-established players such as
right move for any large FinTech. MoneyLion in PFM, Acorn in micro-investing, and FairFX
in payments have also begun their banking services in
For example, Wirecard was founded in 1999 and 2018–19. In 2019, Zhong An, WeLab, and Ping An were
focused on payments services. After establishing itself in the big FinTech names that obtained banking licenses.
payment services, Wirecard decided to offer banking These companies are soon going to start their banking
services to its clients after seven years of its inception. operations, while Square, Coinbase, LendingClub, and
Like Wirecard, established FinTech players like Zopa, Circle have applied for the necessary banking licenses.
Tyro, and Klarna also realized the importance of

This trend of affecting the entire circle of money for customers can also be
witnessed through the incorporation of many neobanks, which have been founded
in the last three to four years across the world. The favorable regulatory policies,
along with FinTechs’ desire to capture a larger market share, have only fueled the
race to becoming a bank.

135
Why Customer Acquisition Is More
Important and Can Provide a Winning
Edge but Profitability Is Also Important
Neobanks around the globe have been working hard to Neobanks seems to have adopted the strategy of tech giants
increase its market share in the banking industry. In Europe, where the initial focus was on scaling by building a large
we have witnessed these digital-only banks scaling their customer base and then devising strategies to capitalize on it.
customer base at an unprecedented rate and taking a big In 2019, Maximilian Tayenthal, Co-founder of N26, said, “We
portion out of the traditional banks’ market share. This trend want to build a global financial services company… In the
is clearly evident in the European regions, where UK years to come, we won’t see profitability; we’re not aiming to
neobanks have added almost 20 million customers. A 2019 reach profitability. The good news is we have a lot of investors
report by AT Kearney found that European neobanks gained that have very deep pockets and that share our deep vision.”
more than 15 million customers between 2011 and 2019; by A couple of years ago, we also witnessed the CEO of Monzo
2023, neobanks are projected to have up to 85 million Thomas Benjamin Blomfield outlining his company’s strategy
customers over the age of 14, which is equivalent to 20% of in the same line: “The more you grow, the more you lose, and
Europe’s population. However, we have witnessed an inverse you have to turn that corner at some point… Getting to
relation where the larger the consumers, the more the losses profitability is not a goal we are prioritizing over-delivering
these digital banks are incurring. So even with the large customers’ real value. If that takes 10 years, we are
consumer base, why are these players not making money? committed to it.” Since these players are fairly new, they need
to establish their foundation and scale their company by
Even with their increased popularity over recent years, attracting users to become profitable.
profitability has been a huge challenge for these neobanks.
According to an Accenture report, neobanks operating in the Company Valuation Users Ratio FY ‘18 FY ‘17
(in Bn, $) (In Mn) (USD Per Loss Loss
UK alone have added over 6 million new customers bringing Customer) Reported Reported
the total number of global customers to 19.6 million in the (In Mn) (In Mn)
second half of 2019 from 7.7 million customers in 2018,
accounting to a staggering growth rate of 150%, outpacing 5.5 7 785 £32.8 £14.8
the 1% growth rate of incumbent banks. With a huge
2.5 3.1 806 £47.2 £30.4
consumer base, these banks are still facing a challenge in
terms of long-term profitability. Even with their large 3.5 3.5 1000 € 32 € 34
consumer base, these banks witnessed a sharp decline of
25% in their average deposit balance from £350 to £260 per 10 20 50 R$100 R$117
customer in 2019. This sharp decline can be attributed to the
fact that customers still prefer incumbent banks for their 2. Limited Product Offerings
savings and monthly salary deposits. Neobanks need to Compared to traditional banks, neobank players offer a
devise strategies to convert their cost-to-serve advantages limited product portfolio for their consumers only in terms of
and rapid user acquisition rate to profitability. payments, investments, or lending, thereby capping their
opportunities for generating a sizeable amount of income. It
further restricts their cross-selling opportunities, unlike the
Neobank continues to lag in profitability traditional banks where they can earn huge revenue with
despite rocketing valuations cross-selling of products.
The low level of income can be attributed to multiple factors
such as competitive pricing with thin margins, limited banking
services compared to the traditional banks, and a relatively 3. Limited Usage by Customers
large share of their customer base being inactive as they use Even if these banks have a large customer base, only a small
these digital-only bank accounts for ancillary purposes. fraction of these customers actually use their product
offerings. A large portion of these customers often uses these
1. Too much focus on customer acquisition instead of neobanks as a secondary account when specific needs or
revenue generation purposes arise.

This scenario brings us to a question — given these challenges faced by neobanks, will they be
able to survive in the long run by overcoming their challenge, and scale up sufficiently and
become profitable? Surely, not all of these neobanks can make it into the game. We have already
witnessed the end of several players; for instance, Hufsy, a neobank in Denmark, has wound up
its operations. However, we do believe that with the right strategic choices, these challenger
banks have the potential to enhance their profitability and achieve a sustainable business model
with a lasting positive impact on their customers.
Source: Fincog 136
Now That They Have Established
Themselves, What’s Next?
Typically, by unbundling banking services and focusing on a single high-value area, challenger
banks have managed to create impressive current account offerings that compare highly favorably
to traditional banks, “Maynard said to Mobile Payments Today via email. "This has convinced many
users to adopt services, with the personal financial management element of many of these
accounts also driving customer satisfaction.”

However, the “challenge” that challenger banks in the digital realm are facing is the demand to offer services beyond those
offered through traditional banking. The ability to do so will not only entice new customers but provide a good framework for
maintaining loyalty among their current users. The aim of challenger banks in the current scenario is to end up becoming
occupying a socio-economic position as back-up/test accounts rather than the preferred and coveted position of primary
accounts. As new entrants seek to capitalize on the perceived new-found market value that awaits neobanks and incumbent
banks push harder to repel an all-digital banking structure, the challenger banks no longer enjoy the comfort that comes with
the assurance of long-term profitability. In such a scenario, one of the main questions to ask is, what value proposition can
neobanks adopt?

1. Personal Financial Assistant by Leveraging corporate fabric of both neobanks, as well as

AI incumbent banks, thrive upon the complementary
By using the immersive interface and experience that nature of financial services. This opens the possibility of
the digital world offers, the challenger banks of the not only providing holistic experiences to customers
future must strive to become personalized financial but even allows for the proliferation of new financial
advisors and assistants to customers. Some of the services altogether. For instance, the integration of API
fundamental technologies available today that allow and cloud storage by neobanks offers the opportunity
neobanks to occupy this particular position include to expand both the level of immersiveness of the
predictive analytics, full banking automation, and of customer experience as well as the degree of relevance
course, artificial intelligence. Digital native banks have associated with it. At the same time, speed and
the opportunity to improve the financial health of an transaction security within the customer’s journey can
economy to a considerable extent by imbuing the be developed through integration with blockchain
customer journey with core insights that are borne out technology.
of a deep understanding of customer needs,
preferences, and demands. With the help of behavior- With the market being cluttered with all kinds of
based predictive analytics, coupled with the power of financial services offered by the increasing number of
Big Data, neobanks can target extremely specific incursions from the digital world, customers are facing
moments in the customer’s life during which a financial much confusion as to how they can reap the maximum
proposal has the highest relevance to them. Voice value. In Europe, a solution in the form of open
processing AI algorithms can power all customer platforms and API is emerging under the acronym of
interactions in the future, thereby offering a source for BaaP or Banking-as-a-Platform. Built not as a single,
exploration of linguistic possibilities with regards to crowded system where everyone is vying for increased
financial forecasts and customer behaviors. dominance, the BaaP ecosystem is developed in the
form of numerous layers. At the technology layer, the
ecosystem allows external developers to integrate their
2. Bank-as-a-Platform
services and thereby extend platform functionality, a
One of the biggest strengths that challenger banks
role they fulfill through the use of APIs. At the business
have in an economy that is shifting towards digital
layer, service providers can improve platform visibility
realms is the ability to integrate with third-party
and applicability, thereby bringing more consumers as
services. Moreover, neobanks also have the ability to
well as consumables onto the platform through focused
make full use of the external infrastructure for the
development of value. The BaaP ecosystem is here to
purpose of processing payments and other such
stay, and we expect to see a lot more of such a layer-
procedures. Such platforms that combine digitally
based proliferation of services.
native and external financial infrastructure through the

137
Now That They Have Established
Themselves, What’s Next?
3. Foreseeing Banking Service
The future that we foresee for banking services is one in which cumbersome tasks like having to fill out long forms for even
simple tasks like exploring banking service terms are replaced by personalized, rapid, and automated measures. As
blockchain technology allows for the secure exchange of user data, and Big Data analytics and AI predictive analytics
enable automated scoring, building personalized profiles of customers has become an intricate and highly focused art
with little to no loss of relevance in the process. Banks are now able to generate personal profiles of customers even
before the request for such a profile has been raised by the users themselves. This makes immersive engagement and
proposal alignment with personal interests a more intuitive, seamless, and conducive process, which in turn occurs
without a cost that has been borne to date in the quest for such experiences – speed.

The banking services of the future will be built upon financial activity feeds that offer in-depth
glimpses into consumer behavior, rather than outdated financial histories. With features like
Instant Authorization enabled through biometrics, quick spending insights, personal financial AI
assistants, instant payments, etc., the future appears to be a place of infinite possibilities as far
as the link between customer relationships and financial service proliferation is concerned.

138
Neobanks: Weathering the COVID-19
Storm
With falling interest rates and consumers seeking safety in tradition, Neobanks are facing an uphill
task of proving that their business models can gain ground and overcome the COVID-19 crisis. With
a fall in spending income and a rise in unemployment rates, neobanks are seeing a significant
impact on transaction volume, which is decreasing across all the areas ranging from payments to
onboarding.

Neobank agility provides them with an

For instance, Monzo, Revolut, Starling, and N26 – all saw a
advantage over incumbents
dip in their growth rate in the range of 18% to 36% in their
Besides their innovative offerings, Neobanks’ USP lies in their
native markets, according to a Sifted-commissioned report
business agility. They are quicker in adapting the traditional
by Priori Data. International neobanks N26 and Revolut also
banks. With their flexible infrastructure, cloud-based
saw a fall in downloads across Italy, the Netherlands, Spain,
technology stack, and their ability to plug into APIs, neobanks
and Sweden. These results are contrary to the general
have the upper hand over the incumbent banks in this time of
expectation that these digital-only neobanks would attract
crisis.
new customers during the lockdown period.
For most of the incumbent banks, the lockdown brought on
The slowdown has been the same for the smaller neobanks
by the COVID-19 crisis has exposed their lack of agility and
across Europe. The Spain-based Bnext saw a 30% drop in
brought their operational and technical challenges to the fore.
monthly users that were majorly travelers. The bank also saw
In general, their customer service has taken a beating with the
a drastic drop in transaction volumes. Given their assumed
inevitable implementation of remote working. Additionally,
advantages during this specific crisis period, this data is
there is an increased pressure on them to ensure business as
intriguing and raises questions about the neobanks’ organic
usual as more and more customers prefer to access banking
growth rate and why they are not the preferred choice for
services online. For instance, Lloyds and Halifax experienced
customers affected by lockdown.
outages in March 2020. An estimate of over 2000 customers
across both these banks were impacted as they could not
This empirical slowdown in Europe is rather unexpected, and
access their accounts temporarily. However, these challenges
it appears that it could continue for the entire duration of the
are uncommon for the neobanks as they are better equipped
lockdown. These results also raise some apprehensions
to deal with such IT failures and technical glitches as they are
about neobanks’ upper hand over incumbent banks.
nimble and are already fully-online.

In the US, however, an inverse trend is being observed as the

An Opportunity for Incumbents to Bridge the digital banking apps have seen a staggering 60% increase in
Gap in the Digital Banking Space? app downloads and a 17% increase in monthly revenue. This
COVID-19 has become a challenging digital test for both can be attributed to the lockdown effect as customers were
neobanks and traditional banks. Many traditional banks that not able to visit their banks. For instance, Chime, a local
were lagging in the digital tech race have been caught off neobank, witnessed a huge number of signups in April 2020,
guard, rendering them incapable of delivering digital driven by the approval to distribute federal stimulus
experiences to their customers. However, the lockdown does packages.
allow for the incumbent banks to catch up with the neobanks
technologically. Barclays, for instance, has launched a Digital Banks amid Corona: Month-on-month
“Banking From Home” digital feature, which allows remote Download Data
(in Lakhs)
customer onboarding to combat the impact brought on by
3
100000

the COVID-19 lockdown. Moreover, they can afford to

Raw Monthly Downloads

increase their marketing spends to build and gain customer

(Android + xiOS)

trust when most FinTech companies can’t afford this luxury. 2

Despite The Edge, Neobanks Are Losing 1

Customers
Top challenger banks in Europe witnessed a fall in digital 0
downloads in the last month, i.e., March 2020. This could
Feb-19 Mar-19 Feb-20 Mar-20
probably be a sign that neobanks may have been negatively
impacted. Note: The data reflects UK downloads, except N26, where the stats come from
its native Germany.
Source: Sifted
139
Neobanks: Weathering the COVID-19
Storm
Neobanks Need to Innovate to Gain their Ground During the COVID-19 Crisis
Given the current situation, everything under the sun is getting digitized and becoming virtual. The current market scenario is
ripe for the emerging neobanks to position themselves in the banking space by innovating products and offering meaningful
value to the customers. It is time to go deeper and solve leading core banking problems which the incumbent players aren’t
able to resolve. The novel coronavirus has made “social distancing” a novel norm. This is making people opt for digital
channels rather than going to physical branches to carry out their financial activities. This change in customer behavior has
opened up a sea of opportunities for the neobanks.
Some of the neobanks are already using this opportunity. They are upping the ante on banking services either by constantly
innovating their offerings or by expediting their product launches to meet customers’ expectations during this modified phase
of their lives.

We list a few neobanks on how they are helping their customers during this crisis.

• Starling Bank (UK) • Atom Bank

To help its personal account customers who are self- This UK-based neobank is providing a mortgage
isolating during the COVID-19 crisis, Startling Bank payment holiday for up to three months, and a
has launched a new product – Connect Cards. The significant amount of support for business loan
card has been designed to help its self-isolating customers. It has gone the extra mile by keeping its
customers who are relying on their trusted friends, customer helplines open from 8 AM to 8 PM, seven
neighbors, or anyone they trust to get their supplies in days a week.
without the hassle of transferring money or handling
cash. The Connected card can only be used for in-store • Nubank
purchases with a balance limit of £200. This São Paulo-based neobank has set aside a 3.9-
million-dollar fund specifically dedicated to helping its
The bank also allows cheque processing over mobile as customers through the COVID-19 crisis. In an effort to
part of its other initiatives. In fact, Starling Bank is the listen to its customers and help them, Nubank has kept
first digital-only bank to allow this. Interestingly, the its chat, email, and phone communication channels
bank also participates as a lender in the government- open 24 hours a day, seven days a week.
backed Coronavirus Business Interruption Loan
Scheme (CBILS). • Tandem Bank
This UK-based neobank is also focusing on keeping its
• Upgrade (US) all communication channels operational to help its
Upgrade launched its first contactless-enabled customers who are facing difficulties in making
Upgrade Card, which will be available in digital form repayments.
through both Apple Pay and Google Pay to enable
mobile payments. This is in line with the World Health • Starling Bank
Organization’s (WHO) recommendation last month that This UK-based FinTech giant has announced several
consumers limit the use of banknotes and, instead, use measures aimed at helping its personal bank account
contactless cards or smartphone payments to reduce customers by offering an “overdraft interest holiday.”
the risk of COVID-19 transmission. The bank has also kept its in-app chat & digital banking
services accessible 24/7. Notably, the neobank is also
How are neobanks supporting customers providing helpful resources pertaining to savings
during the time of crisis? accounts, fraud prevention, and tips for WFH effectively
During these uncertain times, some of the neobanks are on its website.
constantly exploring new solutions that are aimed at not
only reducing customers’ financial stress but also gaining • Monzo
their trust in neobanks. Several neobanks are taking a This UK-based neobank has set up a response team to
proactive approach and providing support to their keep its customer service staff updated about the latest
customers. advice and travel details issued by the government. The
bank is also helping its overdraft and loan customers
Few of these digital-only banks are differentiating with options such as loan repayment extensions or
themselves by demonstrating the awareness of the working out convenient repayment plans.
banking challenges customers are facing during this global
pandemic.

140
Potential Post-COVID Consequences for businesses. Furthermore, the London-based Neobank has
Neobanks also reined in its growth plans and is considering laying off
• Loss of customers: Some customers use neobanks as staff due to the ongoing corona pandemic. The digital
their secondary account and use a traditional bank as banking player was looking to raise 80-100 million pound
their primary account (say where their paycheck is paid for both domestic and global expansion.
into). In these cases, the neobanks can expect either a
decreased account activity or a loss of a client. The Shift in Focus from Consumer to Business
customers’ loss of income due to job loss and reduced Banking
income due to a decline in wages can all contribute to With a slew of measures and relief packages to businesses
this consequence. such as CARES in the US and CBILS in the UK, for
example, the focus now is on supporting and improving the
• Decreased account balance: As the gig economy
SMEs. Because the key to achieving a rise in consumption
workers face a decreased income due to the lockdown
and employment lies in the increased productivity in SMEs.
in place, their bank balances with neobanks will
Neobanks would certainly want to capitalize on these
obviously see a decreased account balance.
developments and will shift their focus towards business
• Fall in interchange revenue: As the consumer spending banking.
falls drastically, neobanks’ interchange revenue that
used to get generated from debit and prepaid card Recent studies show that post-COVID-19, significant
transactions will also fall accordingly. importance will be placed on the business banking sector
as a means to revive the economy. Neobanks will incline
• Difficulty in gaining customer trust: No matter what towards this sector to boost its revenue.
neobanks offer, some customers may still consider
traditional banks as a safer place to keep their money, As SME banking was not a priority sector for the traditional
especially in these uncertain times. banks, neobanks may see this as an opportunity to focus
on this space.
The current global health situation is impacting not only
people’s health but also the economy's health. The This current crisis also opens up an opportunity for the
inevitable financial slowdown may potentially impact the neobanks to cater to the startups and SMEs in terms of
trust factor that people have in traditional banks as some working towards their requirements in the areas of payroll,
customers may choose to withdraw their bank deposits taxation, account receivables, and account payables, to
from the incumbent banks. So, this provides an altogether name a few.
new market scenario for the neobanks. Neobanks will face
an uphill task of gaining deposits and user trust during this Starling is getting around 450-500 new SMEs per day,
COVID-19 crisis. How they respond in this changed market which is contributing to its revenue growth in the form of
scenario in the upcoming months will be crucial. commission from its marketplace and business offerings
to these clients. This growth is partly fueled by the rise in
It will be interesting to see which path the neobanks self-employment and traditional banks’ poor performance
take in the coming days. Will they ramp up things in the SME sector. For example, Lloyds Bank is not
aimed at growth in this digital-only period? Or, will servicing new business accounts, and RBS is unable to
they ramp down things aimed at cash conservation in onboard business customers remotely.
these uncertain times? As of now, we’re witnessing a
few instances of the ramping down. Cashplus, which offers premium online business
accounts, saw a growth of 10% in March 2020. Qonto’s
Some of the neobanks are already seeing a slowdown in growth in downloads, on the other hand, was minimal in
terms of sales and new customers. For instance, German the same period.
neobank N26 has reported a decline in its card sales and
as well as in new customers in a few markets. Some
neobanks are also resorting to furlough some of the staff.
Monzo and Revolut have decided to furlough some of their
employees due to the COVID-19 impact on their

141
As a result of these developments, it can be said that SME banking apps can witness better acquisition rates than
consumer banking apps.

Established

Consumer Business

Source: GP Bullhound
Challenger

The COVID-19 crisis tests the mettle of neobanks. Those that are proactive,
innovative, and adaptive will come out of this crisis stronger. The global crisis, like
the 2008 financial crisis, will shake up the regulatory landscape to address a newer
set of issues and challenges.

142
Future Outlook

143
Future Outlook
potential and an inability to match the word “partner,” in this case, can
Increased Challenger
the scale of big tech or incumbent be easily replaced with “acquire,”
Bank Adoption in the banks, US-native neobanks are still especially as neobanks today seem
vulnerable to the large scale to enjoy considerably high revenue
United States
incursion of European challenger potential.
When compared with other regions, banks into the region.
For instance, a neobank along the
adoption rates and acceptance of
likes of Monzo cannot afford to
challenger banks have been low in Either way, banks from Europe and
invest in the cultivation of a large
the US. There appears to be a other continents looking to enter the
employee workforce for credit
certain type of hesitation and US market are bound to come
risk research but has enough
reluctance on the part of the across various challenges, both in
capital to acquire a FinTech
consumers with regards to terms of competitive forces as well
service provider with a reliable
embracing this new wave of digital- as strong incumbent structures and
credit risk solution further down
native banks, especially when complex regulatory frameworks.
the line.
considering them as their primary
banking service providers. Two core Challenges from Non- As startups young and full of
reasons appear to be fueling this potential, these neobanks have a
reluctance among US consumers: Traditional Players higher chance of sealing such types
of deals as compared to incumbents
The larger giants inhabiting the
Europe has been a hotbed for who might make these moves out of
corporate fabric, such as Amazon
neobank emergence, and hence, sheer desperation rather than with
and others, are in a more than
the rates of adoption here have been the perspective of expanding
comfortable position when it comes
higher. Therefore, most neobanks existing services. The core process,
to acquiring challenger banks or
approaching US consumers tend to in this case, one which has been
smaller FinTech providers. The Big
be from Europe rather than home- adopted by numerous FinTech
Four or GAFA are in a position to
grown names that the users in the startups at this point, is as follows:
enter the finserv market and level
region are privy to. The new wave of
the landscape completely,
neobanks, characterized by players • Attack a niche with the help of a
converting it into their own
such as Varo Money and Chime, great product
playground. Moreover, when these
offer vastly different services • Nurture and develop that product
players enter the market, one can be
compared to their older to the greatest extent possible
sure that they bring in their own
counterparts, such as Moven and • Reach a critical mass of
brand of evolutionary strategies and
Simple, thereby making it difficult for customers
tech to take consumer experience to
large-scale adoption amongst • Seek to be acquired by a bank or
a whole new paradigm. However, at
consumers who might not be fully partner with them
this point, it seems that they may be
aware of what these services can do
waiting for a tipping point to make
for them. The last step, as you can see, invites
their first move, which gives ample
incumbent banks to become a part
time for another possibility to
At present, the financial landscape in of the ever-growing FinTech
manifest itself first – namely,
the US from the perspective of ecosystem of the future, especially
incumbent banks moving towards
neobanks appears something like owing to the fact that a definitive
acquiring challengers.
this – European banks have superior correspondence between new and
offerings compared to the home- old is necessary for the holistic
grown neobanks in the region. At Acquisitions by banking services of the future.
the same time, US-native Neobanks
challenger banks have a better
understanding of local consumer A specific strategy that has been
interests and are better equipped hailed as one of the best means to
to navigate the maze of regulatory develop reputation and market value
frameworks in the region, which is a for neobanks is to partner with
convoluted, complex structure. FinTech providers who offer
However, due to limited revenue complementary solutions. However,

144
Future Outlook
the business layer, service providers transactional interactions to a whole
Expansion of
can improve platform visibility and new level as compared to that
successful European applicability, thereby bringing more offered by traditional banks.
consumers as well as consumables Unfortunately, even though
Challenger Banks
onto the platform through focused traditional banks are sitting on top of
Across Geographies development of value. The BaaP large piles of usable data, they have
ecosystem is here to stay, and we not figured out efficient ways of
European challenger banks have
expect to see a lot more of such a making use of it yet.
experienced enough success in their
layer-based proliferation of services.
home territories and are valiantly
setting forth across geographical
boundaries in order to tap into new Incumbent Bank
consumer markets. Some of the Acquisition of Digital- Partnerships with
destinations on which they have set Only Platforms by
their eyes on include Brazil, BigTech Players?
Southeast Asia, and the USA, Incumbent Banks
• Alibaba recently launched a
among others. At the same time,
Even though acquisitions have been program called Pay Later in
these regions themselves have
successful to a large extent, there partnership with online lender
become breeding grounds for banks
have been some high-profile not-so- Kabbage, aimed at offering point-
that are eyeing the European
successful partnerships like BBVA- of-sale loans of up to $150,000 to
continent as their next exploratory
Simple & BPCE-Fidor. Now, it small businesses. This program
expansion towards better prospects.
remains to be observed as to how was launched specifically with the
The major impetus for these
beneficial these acquisitions will aim of helping SMEs finance their
expansions seems to be the quest
prove to be for the incumbent orders on Alibaba.com. Another
for high-growth economies that have
banks and financial service dimension of the partnership
seen a high degree of internet
providers. No matter what the includes Celtic Bank, which is a
penetration.
success rates might be, it is clear Utah-based banking partner for
that there is a definite increase in the Kabbage. This tri-party
turnaround time as far as product partnership creates value for each
Increased Adoption of
roll-overs are concerned, while the stakeholder involved. Alibaba
the Marketplace rate of acquisitions of digital benefits from Kabbage’s ability to
counterparts has also increased. utilize Machine Learning and Big
Model by Other
Data to determine customer
Players More Focused eligibility much faster than a
traditional bank. Kabbage serves
Modern banks have expanded their Customer Targeting the function of connecting with
product offering beyond the bounds
those SMEs that are in search of
of the traditional social, cultural, and On the one hand, traditional banks
access to cash.
economic position that banks have are treasure troves of consumer
occupied to date. With the help of data, while neobanks have honed
ecosystems that emerge from the processes and methods that can
• At the same time, Celtic Bank is
adoption of the BaaP (Banking- enable the smart use of data. These
able to increase the credit
as-a-Platform) model, banks in processes are specifically tied to
volume, which it extends to
the digital age are able to offer mechanisms like platform-driven
customers through Kabbage.
much more than their traditional data analytics that enables a
counterparts using the power of neobank to keep track of every
open platforms and APIs. At the single part of a user’s journey on
technology layer, the ecosystem the bank’s app. European
allows external developers to challenger banks such as Monzo
integrate their services and thereby have been able to use such
extend platform functionality, a role mechanisms to improve user
they fulfill through the use of APIs. At experience to a large extent, taking

145
Future Outlook
• JP Morgan Chase has also entered a partnership specifically under the premise of improving banking and
financial service quality for its customers. Its partnerships see it enter a strategic arrangement with Amazon for the
issuance of credit cards to Amazon Prime members with the promise of providing them with cashback offers. This
partnership proved to be a major move for JP Morgan as the conglomerate gained access to more than 100 million
Amazon prime customers globally. Furthermore, both the companies are now in talks for launching an Amazon-branded
current account.

• Another such example is Goldman Sachs teaming up with Apple to roll out a virtual credit card to all Apple users.

In conclusion, we can say that, on the one hand, most traditional banks are bracing
for increased levels of competition from Big Techs in financial services.

On the other hand, some of the incumbent banks are choosing to team up with
platform giants to open up digital gateways to revenues and to reclaim the consumer
bases that they lost to the challenger banks.

With the rise of BaaP ecosystems, banks have the

possibility of working together with
both FinTech service providers
as well as BigTechs at the
same time. This particular
scenario bodes well for a
future for tech companies
as well as their customers
that are dependent upon
the existing financial
infrastructure, while at the
same time, posing a
significant threat to
neobanks.

146
THANK YOU
If you want to conduct an in-depth analysis of the above sections of the report or any other
aspect of Neobanks, the MEDICI team can assist you with customized reports and advisory
assistance.

Contact
Salil Ravindran Subhagini Chaudhary Giuseppe Marchese
Head, Digital Banking Head of Sales, Southeast Asia Head of Sales, Europe & Americas
salil@gomedici.com subhagini@gomedici.com giuseppe@gomedici.com

Authors

Kumar Abhishek Namrata Narayanan

Senior Innovation Manager Design Lead
kumar@gomedici.com namrata@gomedici.com

ABOUT MEDICI
MEDICI is the world’s leading FinTech Research and Innovation Platform. As a premiere
destination for FinTech insights, MEDICI has over 13,000 FinTechs on the platform, which
enables FinTechs to scale and create global economic impact. By partnering with banks,
various technology companies, and FIs globally, MEDICI is committed to supporting the
complex financial services ecosystem and enabling stakeholders benefit from the industry’s
accelerated growth and global impact.
Website: www.goMEDICI.com | Twitter: @gomedici

Aditya Khurjekar Amit Goel

CEO & Founder CSO & Founder
ak@goMEDICI.com amit@goMEDICI.com
@khurjekar @amitTwitr
Appendix

148
Stages of Collaboration

As witnessed in 2018, banks have slowly (but steadily)

been buying into the new paradigm of partnering with
FinTechs in different ways.

As a part of their digital transformation

Direct journey, banks and financial institutions have
started to make direct investments in various
Investments
FinTech startups over the recent years.

New technologies of startups are

Strategic integrated into banks’ applications
and also in the form of “white label”
Partnership
arrangement.
Arrangements

Almost one in three banks and asset

managers have plans to buy a FinTech firm in
Mergers & the next 12 months. E.g. Allianz is gradually
Acquisitions moving from accelerator programs to
acquisitions as part of its innovation strategy.

149
The Bank-FinTech Equation is Evolving
Investments/Partnerships/
Mergers & Acquisitions
Banks and FinTechs have had a tricky relationship over APIs are the key enabler of this collaboration. Banks
the years from competing for the same consumers, and are now looking to revamp their core banking platform to
at other times, leveraging each other’s strengths. enable plug-and-play services using FinTech APIs.
However, in recent times, the mutual acknowledgment
of the need for the other has grown and become more
As a result, we have been witnessing a lot of open
evident.
platforms being built across various segments of
FinTech.
Banks are going proactive in their approach to
collaborating with FinTech. We have seen hundreds of
This is seen as a natural step forward to embrace the
bank-FinTech partnerships take place over the years
growing need for co-development, reusability, and
via strategic investments, innovation programs,
agile/rapid application development requirements.
incubators, accelerators, as well as M&A activities.

Banks are sitting on a pool of customer data, which is

Banks are looking to leverage FinTechs’ superior
more valuable than ever in this age of big data, AI, and
technology and front-end capabilities. On the other
ML. Modern FinTech players, as well as incumbents, are
hand, FinTechs are looking to leverage banks’ vast
looking to tap into that data and gain actionable insights.
customer base, infrastructure, and regulatory
However, there are discussions to be had about who
stronghold.
owns the customer data.

Moving towards an open architecture One of the main reasons Apple, for example, has
managed to gather so much support from UK banks is
is the next logical step towards a that it agreed not to hold onto to customer data. With
sustainable growth that banks, insurers, stronger data protection regulations such as GDPR in
and other FinServ incumbents place, it will be interesting to see how this situation pans
out in the coming years.
are set to explore in the coming years.

Collaboration is the key to the future.

Many banks have already realized that they need to act

and are planning their future actions to partner or
compete with startups.

150
The Bank-FinTech Equation is Evolving
Investments/Partnerships/
Mergers & Acquisitions
The FinTech wave begun with the objective of breaking Even while the above trend is taking shape, some banks
banks and incumbents by disintermediating their service and incumbent FIs are beginning to look at M&A. Allianz,
lines and adding an innovative tech-driven customer the biggest insurer in the world, is swinging the
experience to deliver innovative offerings. While pendulum very hard by going all-in for acquisitions and
many FinTechs have established their unique stopping all early-stage or accelerator-style
capabilities as a stand-alone entity, the narrative has programs. Some of these incumbents are following a
moved on from breaking banks to working with banks hybrid strategy for some time by having an innovation
and is in line with working for banks in the coming years department that tries to find out solutions to embed and
as FinTech players now see banks as a valued partner jointly launch an investments arm to take a seat on the
and a potential customer. board and guide the direction of the company.

The above transition was powered by the fact that

FinTech lags behind banks and incumbents when it
comes to customer base, infrastructure & regulatory Thus, banks and FinTech coming
stronghold over their areas of business.
together has given a new direction
By 2016-17, most of the banks understood that it is not to the strategic expansion of the
prudent to think of FinTech as competition. Banks and
Incumbents now look at FinTech as an ally to collaborate financial services ecosystem. In the
and deliver next-generation offerings to their customers. coming years, we can expect the
This fact can be substantiated by the hundreds of bank-
FinTech partnerships that are taking place in recent same trend to continue and take a
years. concrete shape.

Next-
Banks/ Fin-
Gen
FIs Techs
FinServ
• Brand recognition • Innovation-driven
• Customer base • Agile/nimble
• Diverse offerings • Speed to market
• Pool of customer data • Lean set up, no legacy issues
• Robust infrastructure • Tech expertise
• Regulatory stronghold • Analytics
• Access to capital • Niche solutions
• Design thinking approach
• Disruptive mindset

• Scaled & innovative solutions Mobile Wallets Digital Lending Account Aggregators
• Data-driven insights Back-end data & Capital from Account information
• Enhanced customer engagement infrastructure from banks, from banks and front-
• Contextualized solutions banks, front-end decisioning and end dashboarding
• Product efficiency experience from loan servicing from FinTech.
• Enhanced risk mitigation FinTech. from FinTech.

151
Bank-FinTech Investments
(2018 vs. 2019)
The total investments in the FinTech industry reached $58
billion in value in 2018. Incumbents on both sides (banks and
FinTechs) are working towards coming together to meet
growing customer expectations and stay relevant in a
technologically growing world (concerning banking). In
2018, 174 deals were made by FIs/banks in FinTech startups
with $5.44 billion being the total amount invested in those
rounds). More than 74 banks, 10 insurance companies, and 2
asset management companies in 159 FinTechs.

• However, in the first half of 2019, the

total value of investments deal was
$5.52 billion and handsomely
surpassed the total funding value of
the year 2018.

• There were 204 deals where 84

banks invested in 127 FinTechs, 46
insurance companies invested in 56
FinTechs/InsurTechs, and 31 asset
management companies/investment
management companies invested in
40 FinTechs.

• A lot of capital has indeed come from

incumbents’ venture capital arms
which include – but aren’t
necessarily limited to – Barclays
Venture, Santander Innoventures,
Allianz Life Ventures, ABN AMRO
Digital Impact Fund, and
CommerzVentures.

• Furthermore, to explore and utilize

emerging technologies, older
financial institutions are now
organizing to innovate by developing
labs to foster innovation, and actively
partnering with FinTechs offering
expertise in areas beyond their
strengths.

152
Bank-FinTech Mergers & Acquisitions:
An Analysis of FY 2018

In recent years, the corporate development and M&A

teams of banks and financial institutions have started
to get into action. The outright benefit for banks/FIs is
through acquisition is that they get exclusive rights to
the technology which could give them a competitive
edge, rapid expansion into new markets, and a new
customer base. By finding the right mix of
acquisition and investments, banks and
incumbents are looking to up their FinTech game
and come up with innovative solutions to address the
evolving needs of their customers in this tech-first era
of financial services.

In 2018, we witnessed a total of 20 M&A deals

that amounted to a total of USD 1.4 billion.

Breakdown of M&A Deals:

• 10 banks have acquired 13 FinTechs.
• 2 asset management companies acquired 2
FinTech startups.
• 5 insurance companies have acquired 5
startups.
• Acquiring banks/FIs are all headquartered in
North America (48%) and Europe (52%). There
was no major player from Asia that made a
FinTech acquisition.
20 20 • However, it’s interesting to note here that
while most players are established in NA and
the EU, there is an interest in acquiring
FinTechs from the rest of the world.
• While NA and EU FinTechs have been the
target of acquisitions at 43% and 48%
respectively, startups from Asia and other
regions are emerging as the preferred
destination for acquiring FinTechs.
• The total breakdown of acquisitions by
segment indicates that 38% of all acquisitions
have been made in wealth management,
20 followed by B2B FinTech at 19%, lending at
14%, and payments at 10%.

153
Bank-FinTech Partnerships:
An Analysis of FY 2018

ILLUSTRATIVE

ILLUSTRATIVE

While there are numerous partnerships to choose from for understanding the trends related to
bank-FinTech deals, here’s a quick glimpse at a few interesting bank-FinTech partnerships in the
US and Europe from 2018:
• PNC & OnDeck: PNC Financial Services Group’s PNC Bank to leverage technology from
digital lender OnDeck Capital for giving loans to small businesses online.
• Citibank & Thinknum: Citigroup’s partnership with Thinknum (a data startup) provides their
clients with alternative data sets, including social media traffic, job postings, price, availability
of products, etc.
• Barclays & MarketInvoice: Among the most significant partnerships announced in the UK
last year. This multifaceted partnership was formed to enhance how SME businesses in the UK
can manage cash flow and accelerate their growth.
• JP Morgan & Plaid: JPMorgan partnered with Plaid to provide its clients with better control
over their personal data.
• TD Bank with Flybits, Kasisto, and Moven: TD Bank’s mobile app has become the number
one app in Canada (finance category) on both iOS and Android. The bank has leveraged its
partnerships with Flybits, Kasisto, and Moven for creating a contemporary banking experience.
• Goldman Sachs & Cadre: These firms formed a strategic partnership to allow Goldman
Sachs’ clients to invest in a broad-based portfolio of US income-producing commercial real
estate assets.
• HSBC & Avant: These companies have partnered to offer unsecured loans to new and existing
customers in the US.

154
Bank-FinTech Partnerships in High-
Growth Geographies
Like their European and American counterparts, traditional financial institutions are changing their mindsets
and collaborating with mission-driven financial technology (FinTech) companies primarily with for a greater
financial inclusion for all. The primary reason for the incumbents opting for the FinTech partnership route in
the emerging economies is Financial Inclusion – a huge segment of the underserved population that the
current banking landscape is not able to cater to. The key financial inclusion challenges in emerging
markets that mainstream financial institutions are working to address through partnerships with FinTechs:

1. Gaining access to new market segments

The partnerships with the new-age FinTech players enable these institutions to devise ways for reaching out
and acquire new market segments, i.e., the underbanked segments of the population. Since setting up
physical branches in remote areas for a target customer who would be opting for low-value accounts won’t
prove to be a feasible proposition for banks, one of the primary challenges for banks has been the
onboarding of these lower-income customers via traditional means.
• AXA partnered with MicroEnsure for offering insurance products in the emerging markets.
• The partnership between Mastercard and Grindrod Bank and Net1 for providing services to the
underserved population in South Africa.

2. Creating new offerings for existing customers

The second major challenge faced by financial institutions is developing innovative & profitable services for
their existing customer base in the lower market segment. This plays as an obstacle to the steadier and
regular revenue stream for financial institutions compared to the costs of acquiring new customers.
• ICICI Bank partnership with Stellar, a Silicon Valley-based non-profit offering distributed ledger
infrastructure services, to build a blockchain-enabled payments network for their customers.
• Stanbic Bank collaborating with DreamOval to offer a mobile payments platform called Slydepay in
Ghana.

3. Data collection, use, and management

Effectively collecting, using, and managing data for financial inclusion has been one of the major challenges
faced by the financial institutions in this space. The main theme for forging partnerships with FinTechs is to
leverage their expertise on creating alternative risk modelling techniques.
• BBVA Bancomer partnership with Destacame to provide financing solutions to New-to-credit customers
in Latin America.

4. Deepening customer engagement and product usage

Another major challenge for the financial institutions that they are trying to address by partnering with the
FinTechs is to develop a better and deep understanding of customer engagement and usage of products.
The main theme for partnerships here is to leverage digital tools for enhanced customer engagements and
touchpoints.
• BBVA Bancomer in Mexico and Bancolombia in Colombia separately partnered with Juntos to increase
customer engagement and usage.
• PNB MetLife partnered with LumenLab and Imaginate to improve the customer experience and provide
better support for insurance policyholders in India.

One of the geographies that has witnessed a significant increase in

number of bank-FinTech collaboration and has been on par with the
global scenario is India.

155
How Indian Banks Are Leapfrogging
Global Counterparts in Collaborating
With FinTech
Many banks have already realized that they need to act and are going proactive in their approach to collaborating with
FinTech. The digital payment space has seen quite a few such collaborations via innovation programs, incubators,
accelerators, as well as M&A activities. Large banks and NBFCs are looking to establish partnerships in order to expand
their existing lending capabilities in the digital lending space. This creates a win-win scenario as banks are able to gain from
FinTechs’ tech capabilities, unique front-end, and millennial appeal. On the other hand, digital lenders get a referral/lead-
generation channel and get an additional revenue stream as technology providers to incumbents (lending-as-a-service).

Payments

Since 2015, India has witnessed a total of 57 deals being forged between the banks and the Indian startups. Some of the
banks that are leading this race are YES Bank, ICICI Bank, HDFC Bank, Axis Bank, etc. YES Bank has formed more than 20
partnerships with digital payment startups to leverage their superior technology and front-end technologies. ToneTag,
Razorpay, MobiKwik, and Novopay are some of the startups that are leading as the most-preferred FinTech startups for
partnerships by banks.

ILLUSTRATIVE

156
How Indian Banks Are Leapfrogging
Global Counterparts in Collaborating
With FinTech
One of the most successful banks in terms of FinTech partnership is RBL. RBL saw 100% growth in POS network in 2018.
This has primarily been driven by partnerships with FinTech players. One such partnership is RBL and Mswipe, which
enabled the bank to address the millions of merchants outside the regular banking system. Other partners include EKO,
Novopay, Oxigen, MoneyOnMobile, Pine Labs, and Ezetap. RBL presents a good example of partnership vs. procurement
approach in payments and partnership appears to be a winning strategy for RBL.

Lending

Since 2015, more than 48 partnerships have been forged between banks and digital lending startups. Banks who are at the
forefront of these partnerships are YES Bank and Bank of Baroda with total deals of 19 and 12 respectively. Even a credit
bureau like CRIF High Mark has partnered with CreditVidya to offer loans to thin-file and new-to-credit customers. With this
partnership, CRIF intends to help NBFCs and banks to provide loans at reasonable rates to the underserved population,
thereby enabling them to expand their loan coverage.

ILLUSTRATIVE

157
How Indian Banks Are Leapfrogging
Global Counterparts in Collaborating
With FinTech

ILLUSTRATIVE

However, when compared to other segments, the collaboration story in other FinTech spaces like
InsurTech and WealthTech is very nascent and hasn’t seen many partnerships or investments.

WealthTech

ILLUSTRATIVE

InsurTech

ILLUSTRATIVE

158