Fintech disrupter brands

Part
01
of five
Part
01

SWOT Analysis - N26

Valentin Stalf and Maximilian Tayenthal established the N26 bank in 2013. Since the first product launch in 2015, the bank has been supported by investors like Peter Thiel. The company has a total funding value of around $2.7 billion, which is the bank’s greatest strength. On 19th November 2018, N26 opened its doors to the United Kingdom with over 50,000 potential customers waiting in the wings. Below, we discuss this topic in more detail.

Strengths

  • The N26 bank’s standout strength is its enormous backing as a startup where Its funding value stands at around $2.7 billion. World-renowned names behind that backing include Allianz X and Tencent Holdings Silicon Valley’s Peter Thiel and Chinese telecoms magnate Li Ka-shing.
  • N26 was started with a singular vision “to build a bank the world loves to use.” The bank reached a staggering 1.5 million customers in a little over a year. Before it had opened in the United Kingdom, it already had over 50,000 customers waiting to sign up, proving how successful it has been in achieving that goal through marketing.
  • The N26 has positioned itself in the United Kingdom market as a bank who is competing with traditional banks. Banks who have failed to meet the needs of today’s customers on the move. By framing itself as a competitor to big banks, it is playing to its strength and experience in the European market, where large well-established banks were its only competition.
  • N26 also claims it is not competing with other challenger banks and by so doing has detached itself as a threat to its more abundant competitors in the United Kingdom.
  • The bank recognized that the challenger bank space was competitive, and the traditional bank has a glaring weak spot. N26 has positioned itself in such a way that it accorded itself breathing room to grow. This reflects effective analytical and marketing skills.
  • For the consumer, the bank’s strengths over other competitors comprise the following. There are no fees on certain packages when making foreign purchases. Withdrawals are free if in pounds and the ability to transfer money to other N26 users without knowing the bank details. N26 provides the ability to organize your money into easily managed sub-accounts with a free bank account.

Weaknesses

  • Conceivably its rapid growth is its most critical weakness. For instance, when entering the United Kingdom market, they did not realize that their previously direct approach to marketing would be unwelcome. This lack of experience in new markets was an issue that threatened to impair its growth.
  • The general manager for the United Kingdom, Will Sorby, at the time of launch was unsure of the most appropriate approach when dealing with other Fintech companies in the kingdom. In Germany and other places around Europe, the worst they had to deal with was experienced established banks. This weakness highlighted the fact that it had not yet developed a corporate culture that was experienced in approaching other markets.

Opportunities

  • With the banks massive backing, its ability to market itself extensively in the United Kingdom is huge. This can only bode well in a competitive market.
  • The general manager of the N26 bank in the United Kingdom stated, its design will help the bank stand out with its focus on customers who are slightly more first-class, a little older and more mature than its competitors’ clients. This would help the growth of the bank in its new market.

Threats

  • Two primary threats have been identified in the United Kingdom market. The first threat for N26 is the Fintech competitors in the United Kingdom who are more established in the marketplace. For instance, Monzo not only is at the top of the account satisfaction survey it is moreover one of Britain’s best banks. Other successful Fintech companies have failed because of this competition in the United Kingdom.
  • The second biggest threat to the platform is security. In a paper by the Friedrich-Alexander University, N26 was used in a case study for Fintech startups. The study focused on the fact that FinTech relies on design and outstanding user experiences for excellent growth and does not necessarily meet security and established banking standards.
  • The threat is so legitimate that N26 even offers a reward on its official website for any flaws found on its platform.

Research methodology

The N26 bank has only operated in the United Kingdom since November 2018. Due to its brief tenure in the United Kingdom market, no pre-compiled SWOT analysis was available based on the bank’s exposure to this market. However, through our research we wereable to compile a SWOT Analysis.
Part
02
of five
Part
02

SWOT Analysis - Monzo

Research indicates that Monzo is a fast-growing digital bank which is widely known for its unique mobile app feature, fast growth, and customer support. As a newly launched bank, it currently faces opposition from traditional and legacy banks who are fighting to retain their position in the banking industry.

STRENGTHS

  • Monzo is a digital bank, particularly strong in its unique customer support service which is available twenty-four hours a day, seven days a week. According to a recent survey conducted by the Consumers' Association (Which?), Monzo is currently ranked as the best bank for customer service, ahead of all its competitors in the United Kingdom.
  • Another advantage Monzo has over its rivals is its unique mobile app features and user experience. Customers can track their spending, view live breakdowns of funds disbursed; monitor what they're spending money on, and where it's being spent. Recently, it was crowned during the 2019 British Bank Awards as the bank with the "Best Banking App".
  • Also, Monzo is currently the fastest growing bank in the United Kingdom. According to its official reports, 40,000 new accounts are opened every week. Over 750,000 customers use its current accounts. After its launch in 2015, Monzo grew its customer base to 50,000 users in 2016. Currently, the digital bank has more than 2 million customers and has recently expanded to the US.

WEAKNESSES

  • After declaring a loss of £7.9 million (before tax) in 2017, Monzo reported an additional loss of £33.1 million (before tax) in its 2018 annual report. In order to convert into a fully operational bank, there was an increase in the company's overall operating costs by £26.9 million in 2017.
  • Monzo is an international digital bank, however, it is currently available to UK residents only. This puts it at a disadvantage compared to its competitors such as Monese, Starling and N26 who are operational in over 20 countries each.
  • Its account holders cannot receive international payments. This is due to the fact that the bank does not have an International Bank Account Number (IBAN).
  • Monzo's security infrastructure still has loopholes. In 2018, the bank suffered a data breach where the personal details of about 20,000 users were stolen. The hackers gained access to Monzo's database through Typeform — a third-party survey firm.

OPPORTUNITIES

  • Top competitors to Monzo, such as Revolut and Starling, are doing a lot better in terms of foreign ATM withdrawals; Revolut does not charge any fees, while Starling allows its users withdraw up to £300 a day without fees. Monzo is the most expensive; it allows users to withdraw only £200 monthly without being charged foreign ATM fees. This presents an opportunity for Monzo to attract more users by offering more competitive fees.
  • According to statistics from Monzo's annual report, more than half a million adults in the UK don't have a bank account, while about a quarter of the world's population is yet to be banked. This presents an opportunity for Monzo to do more in order to provide access to financial services for those who are financially excluded.
  • There is also room for improvement of the bank's security infrastructure. This would help prevent security breaches and build trust within its current and prospective users.
  • In order to compete more favorably with its competitors, Monzo can increase its growing customer base by providing UK account holders access to international payments.

THREATS

  • Legacy banks are a significant threat to Monzo currently. As a result of Monzo's growth, alongside other digital banks, the number of people who visit the physical branches of traditional banks has greatly reduced.
  • As much as 60 branches are disappearing monthly from UK high streets, and almost 3,000 branches have disappeared in the past three years. Therefore, these legacy banks are fighting back by innovating and trying to imitate the digital banking model.
  • Legacy banks such as Royal Bank of Scotland/NatWest, Barclays, Lloyds, and HSBC have shrunk rapidly, from 92% of all bank customers about 10 years ago to about 70% today.
  • These legacy banks are quickly enhancing their mobile experience. In addition to this, they have a stronger lending capacity due to their low deposit costs.
  • Also, Monzo currently faces criticism regarding its crowdfunding model. The bank is being criticized for allowing its customers to borrow money, through overdrafts, in order to buy shares. This criticism is a major economic threat and might potentially affect its ability to raise funds.

RESEARCH STRATEGY

In order to provide the SWOT analysis for Monzo, our research team searched for credible reports, market insights, industry publications and articles with information with the required information. While we were unable to find any precompiled information on the strengths, weaknesses, opportunities, and threats to Monzo, we have been able to gather qualitative and quantitative data in order to compile the required analysis.

In doing this, our research team began by scouring the company's official website in order to understand its core services and unique selling points. In addition to this, we used the company's most recent annual report to identify its strengths, weaknesses, opportunities, and threats. We then went on to search for various industry publications which compared Monzo with its various competitors in the digital banking space. From here, we identified more strengths, weaknesses, opportunities and threats. Some weaknesses and threats identified were used as a basis for opportunities.

In identifying threats, the research team focused on 'external threats' relative to external factors, rather than internal challenges experienced by the bank. Issues relating to large competitors and economic setbacks were included, while internal factors such as operational risks, and poor security infrastructure were ignored. We also ensured that the strengths provided are major positive characteristics which Monzo has relative to its competitors in the market. Statistics to prove its performance ahead of these competitors were also provided.
Part
03
of five
Part
03

SWOT Analysis - Revolut

Revolut's strengths include its attaining of tech 'unicorn' status at $1.7 billion valuation and high returns on investments, its weaknesses include corporate culture issues and high employee turnover, its opportunities include its acquisition of full UK banking licences and the launch of a unique commission-free trading platform and its threats include the risk of losing its European banking licences and regulatory scrutiny over a compliance issue on their part.

REVOLUT's SWOT ANALYSIS

STRENGTHS

  • Revolut's monthly subscription plans have relatively higher thresholds for no fees
  • High Return On Investment (ROI), with investors seeing a 1900% return on the original stake in just two years.

WEAKNESSES

  • Revolut has corporate culture issues such as its work-at-all-costs and burnout method of operation, which results in employees that have no work-life balance.
  • There is a high employee turnover at RevoluT. "A survey of former employees revealed that most didn’t last more than a year," mostly because the managers at the firm are accustomed to setting over-ambitious goals for the staff. Some workers are let-off abruptly if they fail to meet these expectations. #
  • Revolut's public image as a potential employer and as a UK government guidelines-compliant company has been suffering recently as a result of a series of events that have come to light, such as regulatory scrutiny over an alleged compliance lapse, the departure of its finance director, suspicions of Russian political interference, and a toxic work culture.

OPPORTUNITIES

  • Acquiring a full UK banking license would be an excellent opportunity for Revolut, as it currently has only European banking licenses.
  • Even though Revolut announced its plan to launch a unique, highly anticipated commission-free trading platform in Europe, it is yet to do so.
  • Competitor company Freetrade runs a relatively new trading app that allows for fee-free trades if buy or sell trades are executed at the close of business each day.
  • A shift in the employee culture of the company to be more accommodating of work-life balance and have clear, defined, and realistic goals for the staff could help with employee retention and improve Revolut's employer-of-choice image.

THREATS

  • Revolut is at risk of losing its European banking licenses with new questions rising over its alleged links to the Kremlin, Russia, though its CEO Nikolay Storonsky.
  • Revolut is facing regulatory scrutiny over an alleged compliance lapse from 2018 when Revolut disabled a system designed to automatically halt transactions to individuals who matched against sanction lists, a move that potentially allowed illegal transactions to pass across the banking platform.

RESEARCH STRATEGY

To identify Revolut's strengths, weaknesses, opportunities, and threats, your research team carried out an extensive direct search on various reliable platforms. The team searched through the archives of industrial publishers such as TechCrunch, Finextra, Growth Business UK, and The Verge. The team also visited the sites of industry magazines such as Wired UK, newspapers such as The Financial Times, and The Telegraph, news websites such as BBC, Bloomberg, and Quartz, as well as online industry communities such as Banking Tech(FinTech Futures). These sources allowed for a comprehensive SWOT analysis of Revolut.
Part
04
of five
Part
04

SWOT Analysis - TransferWise

FINDINGS

TransferWise has a wide coverage in up to 71 countries but does not support all credit and debit cards. Partnership of the company with central banks of different nations as well as digital banks would make them more attractive to their existing and potential customers. However, the fluctuating nature of foreign exchange poses a great threat to the company.

STRENGTHS

  • The company has a wide coverage and allow the transfer of funds to 71 countries in the world. This in turn enables them to provide services for 49 currencies as well as 1,600 currency routes worldwide.
  • TransferWise works towards expanding into more countries and this increases the number of their clients. The company has been able to acquire over 5 million customers since its establishment in 2010.
  • The company has a comprehensive FAQ section which explains everything about the registration and use of TransferWise. There is also a video made available to educate their potential clients about the overview of their offerings.
  • TransferWise allows their clients to send money to other currencies easily and fast. This even made the company to earn a 5 star rating from 65,747 reviews on Trustpilot which is a customer review website.
  • The company offers clients the TransferWise borderless account so as to receive and send money at exchange rates which are up to 8 times cheaper than the amounts conventional banking institutions charge.
  • The company being an internet company has both web and mobile apps. The features of these apps include notifications and updates on monetary transactions, good biometric security and alerts on currency rates.

WEAKNESS

  • TransferWise does not support all credit and debit cards and thereby charges additional fees when unsupported cards are used.
  • The company does not provide cash pickup option to their clients. The clients can only get their money from their individual bank accounts.
  • Additional charges are paid when the customer makes transfer from a borderless account externally.
  • There is a restriction in the amount of money that can be received or kept in the Borderless account offering of the company.
  • Even though the website of the company can be accessed in up to 12 languages (which include English, Spanish, Portuguese, Turkish and French languages), the FAQ and help center sections do not have many multilingual options.

OPPORTUNITIES

  • Increased access of TransferWise to central banks of different countries would boost their foreign exchange speed and this would cut costs for them in the long run.
  • More investments in open API development would help in reducing losses experienced by the company during client-initiated foreign transactions.
  • Diversification into university education and tourism would further enhance the global reach and annual turnover of the company.
  • Digital banks are gradually increasing globally and early partnership of TransferWise with them would further make it possible for the company to lower foreign exchange rates by the time these proliferating digital banks have gained grounds, thereby making TransferWise more attractive to existing and potential customers in the future.

THREATS

  • The unstable nature of foreign exchange rates due to sudden fluctuations poses a great threat to the company.
  • Interruption of the company's operating system potentially can disrupt the payments made by clients.
  • Ineffectiveness of the company's partners and/or their service providers would lead to dysfunctions of the respective services affected. This in turn would expose the company and their clients to avoidable risks.
  • Non-compliance of financial institutions (including banks) to the contractual agreements they have with the company has a great possibility of making the company to experience loss financially.

RESEARCH STRATEGY

We started this research by looking at the company's website. We noted the things the company mentioned about themselves. We then searched for the annual report of the company and we got the 2018 report. From this report, we identified information related to the company's threats. These threats were identified as risks which may hinder TransferWise's success in the nearest future.
We also searched business news articles (on domains such as Financial Times, Huffing Post, CNN and Forbes) that had mentions of the company including those that mentioned TransferWise in relation to its competitors. Through this strategy, we were able to get information related to the opportunities available for TransferWise.
Our findings are hereby presented.
Part
05
of five
Part
05

SWOT Analysis - Starling

Sterling Bank's major strengths include providing financial and banking services through mobile platforms for both Android and iOS platforms, offering connections to various digital wallets, low bank charges, among others. We have provided more details about the bank's strengths, weaknesses, opportunities, and threats below.

STRENGTHS

  • Sterling Bank has a first mover advantage in terms of providing a digital-only banking solution and as such has attracted a huge customer base. The bank has no tellers or branches except one office with about 278 employees.
  • One of the bank's major strengths is that they provide both financial and banking services.
  • The ease of opening a bank account is one of the bank's strength as a prospective customer only needs an ID and a facial photograph.
  • Sterling Bank is a digital-only bank that allows customers to enjoy full banking services from the comfort of their home (or anywhere) without having to queue at the bank's physical location.
  • The bank's apps can be easily accessed on iOS and Android platforms, making the bank competitive across various devices.
  • Another strength is that they also offer connections to different digital wallets such as Apple Pay and Google Pay.
  • The bank is very popular, with about 500,000 personal current accounts and 30,000 small business accounts in 2019.
  • Sterling Bank offers the largest marketplace by a financial institution in Europe.
  • The bank can quickly create new features on its apps to adapt to consumer demands because it has access to a large pool of willing investors.
  • The bank's charges are low compared to other big banks.

WEAKNESSES

OPPORTUNITIES

  • The bank has an opportunity to generate more revenue by offering Banking-as-a-Service solutions.
  • There is a big opportunity in the mobile banking sphere where the bank can concentrate and expand its services.
  • The bank also has an opportunity to grow its SME business accounts and individual current accounts customer base.

THREATS

  • Sterling bank faces threats from the Big 5 Banks that have started offering the same services.
  • Customers continually use the bank's services and products without having any real loyalty to the brand.
Sources
Sources

From Part 01
Quotes
  • "N26 announces its $300 million Series D funding led by Insight Venture Partners. The round includes participation from GIC, Singapore's sovereign wealth fund, and existing investors. N26 also launches in the US, and confirms plans to enter the Brazilian market later in the year."
  • "N26 was founded in 2013 by Valentin Stalf and Maximilian Tayenthal—reimagining the retail banking experience for today’s mobile lifestyle."
Quotes
  • "19 November 2018 N26 now available to everyone in the UK, It’s our biggest milestone of 2018 so far. N26 has gone live in the United Kingdom today! "
Quotes
  • "Maximilian Tayenthal, co-founder of N26: Our vision is to build a bank the world loves to use. Our focus is on growth. We want to become a full replacement for any other bank account in the markets we operate in and reach 5 million customers by then."
Quotes
  • "As general manager, Sorby’s mission at N26 is to prevent the six-year-old company — which has 2.5m customers and is valued at $2.7bn — from striking the wrong note with its UK customers. "
  • "When N26 launched in the UK in October, it used a lot of the customer service messages designed for German customers. They were very “direct” — and didn’t go down so well with British customers. The messaging has since been tweaked to meet local customer expectations: “Lots of unnecessary words, very indirect, very overly polite.”"
  • "The in-your-face language was a bit much for some markets: “That was launched in France, where it was really not taken so well,” says Sorby. In the UK, it’s opted for a more pared back #26reasons campaign on London public transport."
  • "He also thinks that, over time, N26’s focus on design will help it stand out to its target customers, who are “a bit more premium, a little bit older, a bit more mature” than those of its competitors. "
Quotes
  • "N26 joins a growing gang of app-only digital banks gaining traction in the UK."
Quotes
  • "“We’re not launching to compete with other challenger banks, we’re competing with traditional banking services that are failing to meet the needs of today’s mobile customers,” the spokesperson said."
  • "Following an initial friends and family phase, a rollout to the waiting list of more than 50,000 UK subscribers is planned, with a full public launch planned for November."
Quotes
  • "This paper looks at N26, a pan-European banking startup and the poster child for young FinTech companies. We assess how security is treated by startups that provide disruptive technologies in the financial sector. In an area that has been committed to security, we find that FinTech companies have modern designs and outstanding user experience as their main priority. This strategy is rewarded by a rapidly increasing customer base but reveals a flawed understanding of security. "
Quotes
  • "Spending Stats: All N26 users will receive automatic breakdowns of their purchases. Users can also organize their transactions with personal tags. "
  • "MoneyBeam: The N26 app allows users to transfer money to other contacts that also use the N26 app. These transfers can be made directly from the app without knowing someone else’s bank information. "
  • "N26 has developed a unique feature called ‘Spaces’. This allows users to divide their current account into various sub-accounts to better manage their savings. "