- Europe’s neobanks have stumbled in 2020, revealing deepening losses and getting hit with complaints from customers about service.
- Investors are pushing fintech challengers to demonstrate that they’re able to monetize their products and eventually make a profit.
- Experts expect the industry will be forced to reckon with consolidation and a shift in focus toward profitability in the wake of Covid-19.
LONDON — In a year when online banking has taken off, you’d think it would be a golden opportunity for Europe’s digital challenger banks to shine.
Research from Mastercard last month found that 42% of Europeans handle their finances digitally more frequently than they did before the coronavirus pandemic, while 62% are thinking of switching from physical banking to digital platforms altogether.
But many of the so-called neobanks have stumbled in 2020, with the likes of Monzo and Revolut revealing deepening losses and getting hit with a multitude of complaints from customers about service.
Monzo, whose founder Tom Blomfield stepped down as CEO earlier this year, caused concern after flagging “significant doubt” about its ability to continue “as a going concern” due to disruption from Covid-19.
Now, neobanks are under tremendous pressure to show they mean business. Investors are pushing the fintech challengers to demonstrate that they’re able to monetize their products, and eventually make a profit. Experts say the space is ripe for some consolidation.
“Thanks to this crisis, there has been a wake-up call to some of these neobanks,” said Ali Niknam, CEO and founder of Dutch online bank Bunq. “To run a healthy business, you need healthy business conduct.”
- Advertisement -
For Niknam, not all digital banking upstarts will make it through the pandemic.
“The complexity of having a start-up, having to compete with these gigantic incumbents and having such a heavy burden of regulation is a mix that not many can muster,” he said. “Those who survive this economic downturn will have a great future ahead.”