INSUBCONTINENT EXCLUSIVE:
Over the past year, startup banks have proven that they have a shot at disrupting retail banking
These challengers have amassed a war chest of funding, announced some ambitious international expansion plans and attracted millions of
customers.And yet, building a bank has proven to be even harder than building a startup in general
for those startups.A year of aggressive growthDue to the regulatory framework and the size of the market, it is much easier to launch a
challenger bank in Europe compared to anywhere else in the world
the startup can passport its license across all EU countries and operate across the continent.N26 raised a ton of money in 2019: last
The company is now valued at $3.5 billion.With more than 3.5 million customers in Europe, N26 announced some ambitious expansion plans
N26 is now live in the U.S
and is already planning a launch in Brazil.Revolut has also been aggressively expanding in order to beat its competitors to new markets
In addition to its home market in the U.K., Revolut is available across Europe
In 2019, the company expanded to Singapore and Australia and currently has at least 8 million users.While Revolut announced that it should
and Canada by the end of last year, the clock ran out on that prediction
The startup has been very transparent about its expansion plans, even though it sometimes means that you have to wait months or even years
In other words: launching a banking product in a new country is hard.The U.S
is a tedious market as you have to get a license in all 50 states to operate across the countryMonzo has been doing well at home in the U.K
It is expanding to the U.S., but the rollout has been slow.Nubank is another well-funded challenger bank
Backed by Tencent, the startup has raised a $400 million Series F round from TCV
According to the WSJ, the startup has a valuation above $10 billion.Originally from Brazil, Nubank expanded to Mexico and has plans to
expand to Argentina.Chime is increasingly looking like the bigger player in the U.S., recently raising a $500 million funding round and
reached a valuation of $5.8 billion
It only operates in the U.S.Starling Bank and Atom Bank only operate in the U.K
features that separate challenger banks from legacy retail banks
Signing up is extremely simple and only requires a mobile app
The mobile app itself is usually much more polished than traditional banking apps.Users receive a Mastercard or Visa debit card that
This way, users can receive instant notifications, block and unblock their cards and turn off some features, such as foreign payments, ATM
withdrawals and online transactions.Challenger banks usually customers promise no markup fees on transactions in foreign currencies, but
there are sometimes some limits on this feature.So how do these companies make money? When you pay with your card, banks generate a tiny,
tiny interchange fee of money on each transaction
offer other financial services like insurance products, foreign exchange or consumer credit
Some challenger banks develop those features in house, but many of those features are actually managed by external fintech partners
Challenger banks generate a commission on those products.But the most promising product is premium subscriptions
While challenger banks started with free accounts and low, transparent fees, they have been selling premium subscriptions for a fixed
monthly fee.Challenger banks have become a software-as-a-service industry with a freemium componentFor example, Revolut offers premium
features, such as cryptocurrencies and disposable virtual cards
feature.This seems a bit counterintuitive, but premium subscriptions have been performing well, according to discussions with people working
You pay a lot in subscription fees in order to avoid small transactional fees
(And you also get a cool card.)Challenger banks have become a software-as-a-service industry with a freemium component
