As #Revolut and #N26 move into mobile, never say never

It is notable that a few challenger neobanks are expanding footprint into telecoms, namely Revolut and N26.

N26 joins Revolut in disrupting the telecommunications market

The interesting thing here is that there have been many telco’s trying to move into banking – think Orange – and vice versa, but it rarely works.

Orange checks out of the banking sector

The reason? Different cultures, motivations, measures, rewards and structures.

Going way back when I worked for NCR, which was a subsidiary of AT&T. There were many discussions about how AT&T could leverage their bank partner structures, and the conversation always ended up:

AT&T: How can we get more data on the network?

Bank: How can we maximise bps?

AT&T: What’s bps?

Bank: Basis points differentials between credit and debit?

AT&T: WTF?

Bank: It’s how we make money!

AT&T: So, how can we get more data on the network?

This may sound like a silly conversation but there is massive differential between telco thinking and financial thinking. In fact, a good friend used to work with PayPal and tried to forge a similar expansion into the telco world and repeated everything outlined above. In fact, I’ve heard the same from many, so what would make Revolut and N26 different?

I guess the first thing is that the conversations around integration of mobile and finance started years ago but, today, many financial services systems are part of the mobile network. They are apps, not branches, and providing both services makes sense.

Valentin Stalf, founder and CEO of N26, says: “With N26 SIM, we’ll offer flexible and affordable mobile plans that can be activated straight in our app with just a few taps. Together with our network operator Vodafone, our customers can be connected through one of the best mobile networks in Germany, setting new standards in the telecommunications sector.”

In other words, N26 SIM is not offering a new and separate mobile network but purely acting as a distribution partner of Vodafone. The two companies stick to their knitting.

It is as yet unclear about Revolut’s plans.

Revolut to join the mobile phone plan shake-up with key roaming offer included

When contacted, Revolut did not disclose whether it would be running its own mobile network or using an already established network but, imho, they are more likely to be an MVNO (mobile virtual network operators) than running their own network. In other words, they will be similar to N26 and purely providing options based upon another network operators systems.

The thing is that this is not a new development. Many banks have tried to act as MVNOs over the years and many telcos have tried to offer banking … but the conversation always boils down to the same basic conflict of focus: data on the network versus basis points differential and risk.

Having said that, never say never:

Banks and Telcos? Two become one! - Chris Skinner's blog, November 2018