App-banking is the future. Without any doubt. By mid-2019 the German Fintech startup N26 counted some 3.5 million customers across while its UK competitors Revolut and Monzo recorded more than 8 and 3 million customers respectively. It took N26 only some eight months to acquire 1.5 million customers from November 2018 to July 2019. Since July 2019, N26 is accepting customers in the U.S. App-banking, it seems, is easily crossing regulatory borders. Quite Impressive, isn’t it. Fintechs are for sure here to stay although there are still some issued with regulatory compliance, KYC, and AML. But that’s no different from traditional banks.
Investors still love Fintechs
Investors love the new Fintechs and invest tons of money. N26, for example, raised $300 million funding in January 2019 and another raising another $170 million in July. The company is now valued at $3.5 billion, TechCrunch estimated. The valuation of Revolut may actually already be around $10 billion, The Telegraph reported in Oct 2019. The company plans to raise at least $500 in 2020, Reuters reported.
The high Fintech valuations are accepted by investors despite huge losses. Revolut’s 2018 net loss doubled to almost 33 million pounds as it invested in its development, but revenue rose to 58 million pounds from 13 million a year earlier. N26, on the other hand, has officially said that it does not know when and how it will make a profit in the future.
FinTelegram has tested the three challengers – N26, Monzo, and Revolut – over the last couple of weeks and is officially impressed. The critical Know-Your-Customer (KYC) procedures work perfectly within minutes to hours. Also cross-border and multi-jurisdictional. With Monzo, for example, one of our employees (German citizen) in Serbia with Serbian address (i.e. non-EU/EEA resident) also received his activation within 6 hours. Even though the online KYC system works slightly different for all three banking apps, all three easily detected false, manipulated or defect documents. Given our experience with incumbent banks and their relaxed and slowly KYC procedures, we were really impressed with this new AI-supported approach. Algo-based KYC has its merits.
We were especially impressed by Monzo‘s initial “Soft Credit Check“. Apparently, the creditworthiness of the new customer is checked on the basis of certain soft factors and, if appropriate, a credit limit of up to GBP 1,000 is offered to the new client from the very beginning. Without a commitment fee. This is retail banking at its best.