According to a study conducted by Mastercard, 42% of Europeans believe they manage their finances online more often than they did before the pandemic, and 62% of these respondents plan to switch from a “physical bank” to an online platform. Regardless of what one might think, this spectacular acceleration in the market has hurt some European neo-banks. You stumbled, but some of them could consolidate in 2021.
Neobanks lose a lot of money
Growth inevitably costs a lot of money. This is what the vast majority of startups observe. During the Covid-19 pandemic and in the course of 2020, the European neobanks were obviously able to achieve this. The demand for new generation banks has exploded. However, some neobanks suffer. This is the case with Monzo and Revolut, two new generation banks that have seen ever greater losses since early 2020. They have also received a wide variety of complaints from customers regarding their services.
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Tom Blomfield, the founder of Monzo, even stepped down as CEO earlier this year. This deviation has logically raised concerns internally. Tom Blomfield said he was unsure whether he would be able to continue operations due to the disruption caused by the Covid-19 crisis. It must be recognized that neobanks are under tremendous pressure to show that they mean business: investors are pushing them to show that they are able to monetize their products and make a profit with it.
Not all players are used in this crisis
For its part, Revolut was also hit by the crisis. Neobank tries at all costs to convince its customers to switch to premium offers. Despite a record fundraising drive of € 500 million in February 2020 (the largest fintech fundraising drive in Europe), Revolut has not seen any profitability. The company’s growth is very expensive: Revolut quadrupled its workforce, launched Revolut Junior, and launched an offer in the United States in early 2020.
Ali Niknam, CEO and founder of Neobank Bunq: “Thanks to this crisis, some neobanks understand that it is high time to wake up. To run a healthy business, you need healthy finances. Not all newbies to online banking will survive the pandemic. The complexity of starting a startup, the competition from established traditional banks, and the heavy regulation of the banking sector are a complex mix. “
According to market experts, big European winners and some losers will appear soon. There will certainly be mergers and acquisitions in the months ahead. This was the case with Shine this summer, for example. The French Neobank was bought by Société Générale to promote their respective offers. For example, Société Générale bankers can offer their professional clients the use of Shine.