Competitor update

[alexs (Alex Sherwood)]

@mikedefieslife

Take Atom for example. BBVA is a major investor with a 29%. So presumably a full take over, or an IPO will be their exit strategy.

I expect you’re right about that.

@mikedefieslife

I wonder how sustainable that is considering the costs they face in opening and maintaining the accounts.

I think it’s too soon to say whether their approach is going to work, they only launched 8 months ago! But this is another example of a FinTech bank without bank branches (which make up 40% of the legacy bank’s costs) which should help.

@mikedefieslife

Revolut, they were founded two years ago, and have hit half a million users, which is impressive.

It is. It’s worth bearing in mind that they offered cash incentives to encourage users to sign up though, whereas Monzo haven’t & are at over 150k users now.

@mikedefieslife

They have since tightened up on how the card can be used fee free

In addition to the markup at weekends, there’s also a fair useage policy which limits the amount of ATM withdrawals you can make & FX conversions. The new premium product increases the former limit & removes the latter so there must be some customers who pay fees when they go over those thresholds, at the moment.

@mikedefieslife

recently introduced a premium membership which should bring in additional income

It should, although it didn’t sell out that fast, especially considering that it enabled users to invest in the next crowdfunding round.

@mikedefieslife

I wonder if a banking licence is something they might pursue in the future?

The CEO has suggested that they won’t, although that article suggests they’ve keeping their options open.

At the moment, that looks like one of the key differences between them & Monzo / Starling - the latter can earn income on optional overdrafts whereas it looks like Revolut will be reliant on perhaps not so optional, fees. Although it looks like Revolut have some other revenue generating products on the way.

@mikedefieslife

If so is the market large enough for Monzo, Atom, Starling, Revolut, and Tandem?

There are 65 million current accounts in the UK at the moment & none of the challengers have even a million users so it’s the legacy banks that’re really the competition here.

@mikedefieslife

the larger banks will start to fight back at some stage (though this might a while given they are locked into antiquated systems).

Simon makes a pretty compelling case for the reasons why they won’t be able to fight back here or at least, not quickly enough.

Atom’s business model is so similar to the legacy bank’s (just without the branches) that we can probably safely ignore them. It doesn’t look like Tandem will have a banking license anytime soon so you can bundle them together with Monese & Revolut.

I believe that technology will be deciding factor here:

• The prepaid card providers are reliant on 3rd parties like Wirecard & GPS and we’ve seen how that limit’s a company’s ability to innovate & avoid outages. Monzo will be able to do some very interesting things once they’re their own issuer, processor & are working with their own ledger etc.

• When I asked Tom, he said that leveraging data & identity will be much more important than the overdrafts long term. I assume that being a bank helps with the identity piece.

• Monzo’s adoption of a microservices architecture should enable them to innovate at a much faster pace than the competiton.

• The biggest tech companies are all trying to become platforms. The most obvious example is Slack which creates a central hub for users to work in, then enables easy access to data / tools from other providers. Monzo is trying to do the same thing & that’s what should enable it to reach much larger scale (& revenue) than a financial services provider.

So when you combine those factors, it looks like Monzo & Starling are best placed to capture the largest portion of market share & I doubt that all of the challengers will survive. It’s too soon to say who will end up winning that battle but I’m sure you can guess who I’m betting on