Someone asked me about the other challenger and neobanks after yesterday’s blog. I guess we focus upon Monzo, Starling and Revolut, because they are the front-runners. But there’s also Aldermore, Atom, Tide, Tandem, Lintel, Metro, Monese, OakNorth, Zopa and more.
Well, I don’t have enough time to write about all of them and I know some better than others. For example, I followed Metro Bank closely since their launch in 2010. I knew them before launch and was excited at the idea of Britain’s first new retail bank since dinosaurs ruled the Earth. They led with a branch-first approach, digital came later, and then they stumbled and fell over poor capital metrics accounting. A scandal ensued, the share price plummeted, trust in the bank tanked … but they’re still rumbling along. In fact, if you didn’t spot it, they acquired one of the UK’s leading peer-to-peer lenders the other day, Ratesetter.
Interestingly, since Craig Donaldson and Vernon Hill were asked to move along as Chief Executive and Chairman after the debacle, the bank has a new gun in the chair: Dan Frumkin. Dan is described as a restructuring specialist with a background at Royal Bank of Scotland and Northern Rock, and seems to have a very different future view for the bank.
For example, Vernon believes wholeheartedly in stores. We call them branches, but he’s a retailer and these are his high street stores for selling. 77 of them after a decade, and most designed by his wife, Shirley, whose fees are always questioned.
Dan Frumkin doesn’t like branches . They are a drag that “consumed capital and were a driver of fixed costs”, he wrote in a presentation to investors, they were “too large”, “not efficient”, had “high fit-out costs” and “long leases, often without breaks”, and were “expensive to close”.
Andrew Hagger, founder of personal finance site Moneycomms, said: “Opening 70 plus branches in 10 years while the rest of the industry couldn't close outlets quick enough has always been a strategy that I've struggled to get my head around.”
Nor me. So, Metro falls into an interesting chasm of space. A branch-first business launched in digital-first age.
Similarly, I know Tandem pretty well as Ricky Knox was knoxing around the circuit with me back in the day. You may think it’s all quiet on the Tandem front now, but it’s still rolling along quietly. According to Companies House, Tandem lost £13.6 million in the year ending 31 December 2018, but claim more than 800,000 customers and received a further £60 million in funding just last March.
Tide Bank is bubbling, with a recent deal signed with MasterCard to expand its footprint in the small to medium sized enterprise (SME) space, Tide’s core market.
At the turn of the year, Monese was forecasting to become another UK FinTech Unicorn but, by May, those plans had stumbled and stopped. It was considering layoffs and its funding ambitions halved.
The only other one of these names I will pick on is OakNorth, as they’ve been lending around £100 million a month to SMEs since the March lockdown came into force, as well as expanding their banking platform technologies and services into overseas markets.
In fact, OakNorth is probably the most successful UK challenger bank who no one talks about achieving a 95% rise in pre-tax profits in 2019 to £65.9 million, up from the £33.9 million recorded in 2018.
The bank has lent over £4 billion to British businesses since launching in September 2015, and attracted deposits from 144,000 savers.
So yes, we talk a lot about Monzo, Starling and Revolut. Main reason: they are head-to-head getting the headlines and valuations. Meantime, there is a quieter bunch of hard-working, customer-focused challengers and neobanks all running alongside them. They’re just not shouting about it so much.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...