Failure of Fintechs


(Bruce) #1

I’m loving the large number of fintech companies sprouting up everywhere, it is really starting to open up a good selection of choice for each type of product. For example, if you’re looking for investments and want something simple you can pick robo investors from wealthify, nutmeg, Moneyfarm, now plum and many more…

My concern is that not all of these companies are going to last. It’ll be quite annoying to lose out on :moneybag: if one of your picked products goes under.

Is there somewhere visibility of how these companies are doing, and predictions on who’s going to be around in 10 years? I realise most are private companies and won’t share this detail unless it’s a great success story.

Note: The great thing about our fintech environment is the government protection which seems to cover a lot of the products (clearly not all), such as FSCS covering up to £50k on ETFs and £85k cash… obviously check the companies before you give them your money…


#2

that £85K cover you mention is not for “fintechs” but “banks”, so, many fintechs (such as Revolut) are not covered by the FSCS protection (or other European equivalent).


( related to Monzo CEO, Investor in Monzo ) #3

plus a few more that could be potential termed “Fintechs”

https://www.fscs.org.uk/what-we-cover/products/


(3 Round Investor) #4

Great to see so much disruption in stagnant industry wealthify are now back by Aviva


#5

who are the definition of stagnant!


#7

I know that some like Plum do not have FSCS but are FCA registered and money is protected.

Taken from the help centre:

'When you deposit money in a bank, the bank will usually lend out (part of) your deposits. This is how a bank makes most of its money! What this means is that your money is effectively “at risk” if the bank goes bankrupt, hence there is a need for deposit insurance, commonly known as FSCS, for up to £75,000. We are not FSCS covered as that regulation does not apply to us.
Your Plum savings are deposited in a secure account and held as e-Money by MangoPay, our e-Money provider. This means your money is ring-fenced and cannot be lent out by the bank. It also cannot be claimed by any of MangoPay’s creditors.

This means if the holding bank, our e-Money provider, or ourselves go bankrupt you will not lose any of your money. This is very important to us and will always be the case with your Plum deposits. If Plum or any of its partners go bankrupt the money is returned to our customers with no upper limit.’


(Oliver Mitchell) #8

The difficulty is building new business models for financial products. Banks used to (and still do) heavily cross-subsidise current accounts with profitable credit products (e.g. cards, mortgages). In the new marketplace model where products must stand alone they need to figure out new ways of making $$. I don’t see a lot of products doing it yet.


#9

You got it right. That’s why it is important to come up with a business model that generates revenue. At the moment, they are losing money. Instead of using piecemeal measures like stoping card top-ups, they need to come up with new ways of generating revenue.

Don’t only look at cutting costs. First of all, look for ways to generate income and leave your users alone. You will upset your user base by telling them not to withdraw cash or suggeting they move their salary to them. Just stop suggesting that by using their accounts, they cost the bank money. I would be tired of hearing this over and over again. Instead, charge for features that cost you money.

They need to smarter than this. There are new neo-banks, fintechs or what not, being established every day. Very, very few will survive.