Independent digital banks are new providers of full service banking, financed by outside interests keen to profit from an industry ripe for disruption. In practice, because of the time and money it takes to obtain a banking license, a large corporate backer is typically involved, often a bank.
Top new independent digital banks
Listed below are the leading new independent digital banks, as identified by GlobalData.
Atom was co-founded by the former chairman of Metro Bank and the former CEO of First Direct, Anthony Thompson. It raised $400m from investors, with BBVA having a 39% stake. The app-only service provides savings accounts with 2.4% average rate of return (ARR) and mortgages offered through brokers. The bank relies entirely on facial and voice recognition for account access and payment authorisation.
Banco Original, Brazil’s first digital-only bank, is a forerunner in banking innovation in South America. It offers a fully digital application process and makes extensive use of cloud-based technologies. Its open banking APIs allow TPPs to access account and investments data, and enable payments between Banco Original accounts. The bank also uses its open banking platform to offer its services via Facebook Messenger.
Chime is the biggest neo-bank in the US with over three million customers, designed to help Millennials better manage their money. It’s entirely app based, and lets customers interact with service agents, receive real-time tips and alerts, and apply for new products. Chime has no minimum balance, overdraft fees, or monthly fees.
Fidor Bank, which received a new banking license in 2009 and was subsequently acquired by France’s BCPE, is the first example of marketplace banking. The bank has a direct to consumer service, which uses APIs to enable customers to pull in a wide variety of different features and functionality. Fidor has a partnership with Currency Cloud to let customers buy foreign currencies online, make payments, and view balances in a variety of currencies. It was also the first bank anywhere in the world to use the Ripple real-time payment protocol to provide fast and efficient payments. Fidor also offers the Fidor OS Technology Stack, which is an API-based white label technology designed to work seamlessly with banks’ existing core banking technology as well as Fidor’s omnichannel front end framework FidorX, again fully API driven.
Monzo is a popular mobile-only bank with over one million customers. It offers sophisticated money management services, integration with Uber, savings pots, and drip-fed tips and advice. Monzo built its own core banking system from scratch using mainly open source tech. Linux, Apache Cassandra distributed databases, Google’s Go programme language, and a PostgreSQL relational database at the back-end. Infrastructure is hosted on the Amazon Web Services (AWS) cloud. It will use an API-enabled marketplace to offer a full range of products. Its only in-house product is its current account, and it will earn revenue through referrals to its third-party partners. The marketplace is currently in beta testing, but when launched will offer access to products and services such as energy switching, individual savings accounts (ISAs), P2P investing, mortgages, and insurance.
Monese provides full UK current accounts to customers in the country and across Europe. It targets people who “live their financial lives in multiple countries”, and received a $60m cash injection at the end of 2018 to fuel its European expansion. The bank has over 600,000 customers who are moving over $2.5bn dollars a year, and claims the number of new monthly customer has been tripling since the end of 2017.
N26 has partnered with P2P money service TransferWise to let customers make international transfers in foreign currencies directly from their app. N26 is a German-based bank that now operates in 17 European markets. The digital-only bank offers several API-enabled TPP integrations, including TransferWise for international payments, Vaamo for investments, and Raisin for savings. N26 offers its services throughout most of mainland Europe and the UK and launches in US in 2019.
Starling, a mobile-only bank that opened for business in 2017, operates on a marketplace model. The only product it produces in-house is a current account, with all other products sourced externally and integrated into its app via APIs. Currently, Starling Bank hosts two investment specialists (Wealthify and Wealthsimple); a mortgage broker (Habito); a travel insurance provider (Kasko); a pensions aggregator (PensionBee); and two payments-based loyalty schemes (Flux and Tail). The bank was set-up by Anne Boden, formerly COO of Allied Irish Banks, after she was frustrated by the transformation process at that big incumbent bank. They have pursued a marketplace strategy using white label tech. The new digital bank from RBS, Bo, uses Starling’s payment-as-a-service technology.
Entrepreneur Oleg Tinkov founded Tinkoff Credit Systems in 2006, after working with BCG to see if a bank without branches could work in Russia. Tinkov invested $70m in the bank and based it on Capital One. In 2013, it was named bank of the year by the Financial Times. Today it is the largest independent digital bank in the world by customers.
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