The World’s Top 10 Neo- and Challenger Banks in 2016by Fintechnews Switzerland September 3, 2016
In 2015 and 2016, a new breed of challengers have emerged – the digitally focused challengers, such as Atom, Fidor Bank, Monzo and Starling, are continuing to grow with a number of them seeing improvements in profitability.
According to KPMG, total profits for the challengers increased by £194 million against a drop of £5.6 billion for the UK’s Big Five: HSBC, Barclays Bank, Lloyds Bank, The Royal Bank of Scotland and the UK subsidiary of Santander.
These challengers are distinguishing themselves through transparency, superior data analytics, cheaper banking services and simpler business models that provide them a cost advantage.
Challenger banks shouldn’t be confused with neo-banks. While neo-banks offer a mobile-first banking experience in partnership with a traditional bank, challenger banks aim at becoming fully-licensed banks, creating new data-driven banking experiences and pricing models.
Today, we take a look at the world’s top ten neo-banks and challenger banks.
Atom Bank is a UK digital challenger bank founded in 2014 by Metro Bank co-founder Anthony Thomson. It received a full license from the Bank of England in June 2015 and launched in full after its regulatory authorization restrictions were lifted in April 2016.
Atom Bank aims at offering mobile personal banking and savings as well as business banking, loans, and mortgages. The startup has raised over US$166 million in venture capital from BBVA, Toscafund Asset Management, Anthemis Group, among others.
Founded in 2011 by Brett King, Moven is a neo-bank that partners with CBW Bank on its direct-to-consumer product. Moven provides a mobile first experience platform that connects a bank’s products to the end consumer experience.
Moven’s app comes with a debit card and contactless payment sticker. The app provides real time spending insights that aims at motivating customers to make smarter decisions and save more. The startup has raised over US$24 million in funding so far.
WeBank, the online banking affiliate of Chinese Internet giant Tencent Holdings Ltd., is China’s first digital challenger bank launched in early 2015. Its name comes from WeChat, Tencent’s popular instant messaging and social networking app.
WeBank was the first private bank to start operations under a pilot, after the banking regulator granted licenses to six similar institutions in 2014.
Earlier this year, WeBank raised over US$450 million in a funding round led by US private equity firm Warburg Pincus, a deal that valued the venture at more than US$5 billion, according to the Wall Street Journal.
Launched in June 2015, MYbank is Alibaba and its affiliate firm Ant Financial’s response to Tencent’s WeBank. Similarly, MYbank is a challenger bank that provides an entirely digital banking experience.
MYbank was released two years after Alibaba, China’s e-commerce giant, rolled out a personal wealth fund called Yu’e’bao.
MYbank was the country’s second digital player to receive a banking license.
Simple, initially known as BankSimple, is an American neo-bank founded in 2009 that has partnered with Compass Bank and The Bancorp Bank for banking services.
Simple provides FDIC-insured checking accounts and is part of the STAR network for surcharge-free access to around 55,000 ATMs.
Simple was acquired by BBVA in 2014 for US$117 million to accelerate the bank’s “digital banking expansion.”
Founded in 2013, N26, formerly known as Number26, is a German digital challenger bank aimed at revolutionizing the traditional banking industry.
In July 2016, N26 received its German banking license and simultaneously announced the extension of its financial platform as well as the addition of the bank’s first investment product.
The initial N26 Invest product for German customers is offered in cooperation with Frankfurt-based startup vaamo. Customers can use N26 Invest to put their money into portfolios right from the N26 app.
N26 has raised over US$50 million in funding so far.
Launched in Munich in 2009, Fidor Bank is a German digital-only challenger bank that develops banking services and solutions for the digital generation. Fidor Bank launched in the UK in September 2015 having applied for a UK banking license in January 2015.
Licensed in Germany, Fidor Bank serves over 120,000 account holders and some 350,000 registered community members.
In 2014, Fidor became one of the first banks to use the Ripple internet-based payment protocol.
The bank was acquired in July 2016 by France’s second largest group for banking and finance, Groupe BPCE for an undisclosed amount.
Headquartered in London, Starling is a licensed mobile-only challenger bank founded by former Allied Irish Banks COO, Anne Boden in 2014.
In July 2016, Starling received its banking license from the Financial Conduct Authority.
Starling focuses on offering a limited selection of services, centering around current accounts. The app, which hasn’t launched yet, will offer alerts for smarter money management and real-time monitoring.
The venture has raised US$70 million in funding so far.
Monzo Bank, formerly known as Mondo, was set up in 2015 by Tom Blomfield following his exit from rival challenger Starling.
Monzo is a challenger bank based in the UK that is known for setting the record for “quickest crowdfunding campaign in history” when it raised £1 million in 96 seconds via the Crowdcube investment platform.
Monzo was granted a full banking license “with restrictions” in August.
Founded in 2013, Tandem Bank is known for being the second challenger bank to be granted a banking license in the UK in December 2015.
The company plans to offer digital services including current accounts, credit cards, and loans via its mobile app and website.
Tandem Bank hasn’t launched its app and yet, the company is reportedly valued at £65 million.