October 28, 2019

European fintech weekly: The future of neo-banks and inside Revolut's Singaporean launch

Can Revolut take on Asia and how many European fintechs are going to survive?

Isabel Woodford

5 min read

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1. Revolut launched in Singapore but it's not going to be plain sailing

It was widely reported last week that Revolut launched its travel card in Singapore, its first move in Asia. But there are few obstacles ahead.

Firstly, Singapore's government has a stake in local DBS Bank, which Barclay's Megan Caywood tells Sifted could create some regulatory friction. This suggests that Revolut's ambitions to take on incumbents, help 'ordinary' people and offer fully-fledged digital accounts might be a way off.


Revolut is also not the first challenger FX-card in Singapore. The fintech company will take on local players like YouTrip, which claims it has 400,000 downloads and boasts Mastercard backing as well as a popular user-interface.

Revolut also faces strong competition as a domestic spending card. The UK-based challenger is up against payment solutions like GrabPay, the digital wallet run by the creators of Southeast Asia's largest rideshare company, which uses QR codes to do quick transactions. In addition, Singaporean banks have invested in solid mobile apps (like DBS's PayLah!).

Revolut still offers the added advantage of spend-management, but reliance on users topping up via their Singaporean bank accounts may weaken the overall appeal.

Separately, a handful of Singaporean users told us that they hadn't been able to add non-SGD($) to their Revolut cards, suggesting the 'launch' hasn't got the full green light yet. This is despite months of pilots in Singapore, racking Revolut up a waiting list of 30,000 people in the process.

To its credit Revolut has snagged former Uber Eats manager Eddie Lee to oversee its Asian operations. Experience and local knowledge will be a serious asset in this market.

A richer target audience could also offer Revolut a healthy revenue stream. The card will largely appeal to "Asian jet setters" according to a regional analyst, offering the company a lucrative albeit exclusive customer base.

So while Revolut may not be able to boast enormous customer numbers in Singapore, it could benefit from the selective, wealthy user base it has established there. Japan is Revolut's next target in Asia, with a launch scheduled for early 2020.

2. Experts weigh in on challenger banks' survival

Last week Sifted welcomed two guests to our first remote roundtable to discuss the fate of challenger banks. The panellists were Roxane Sanguinetti, a former Bank of America Merrill Lynch trader who now runs a capital markets fintech, and George Davies, a managing partner at European venture capital fund Hambro Perks.

The conversation centred on neobanks' need for niches, the fragility of young brands and their survival prospects.

Here are the main soundbites (tweaked for coherence):

Has the neobank market become oversaturated? Can they all fit?

George: I'd be really surprised if all five [major challengers] survive in their current form... Like any fast-growing, innovative company things go wrong. Imagine saying three years ago that WeWork would be this failure story... It's the same principle.


Overall I'm most interested in those either carving out niches or making infrastructure plays in banking.

Roxane: I think the pie is big enough for all of them... each consumer will find which one is right for them. Ultimately, having more choice is a good thing.

What are your main concerns for this sector?

George: We talk about global expansion but most of them haven't done that yet. The [international] growth is priced into those valuations today but it's not been delivered yet. Also, the jury is still massively out on whether they can continue their customer growth. It's costly.

Roxane: Security is often discussed as an issue but they've already reassured me [of their safety]. I bank with them completely. And if they manage to convince millennials there's enough security behind them they're winning, given 75% of the workforce by 2025 will be millennials.

All of them have also hired from the traditional banks — that adds security and experience. Saying that, I don't think everyone is suitable for a job in fintech. It takes a certain personality, you have to be able to take the risk...So I don't think we'll see a massive exodus.

I hope culture is something fintech leaders are thinking about every night. It might be their biggest challenge.

George: It'll also be interesting to see if they can get the culture right... You've got to find a balance and do it in a way that you don't stifle what's great about a company. I hope it's something the leaders of fintech are thinking about every night. Because it might be their biggest challenge over time, actually.

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Which of the big players are you most confident about?

George: I'm most excited about Starling and OakNorth personally. They've identified a group they can serve really really well, and in a really sustainable way... [Because] SMEs offered a gap they were served really badly by the big banks. You have to be central to people's lives to be a long term sustainable business because when you're dealing with consumers, it's somewhat precarious; fashions change.

Roxane: I have a preference for Starling; I think the business has been leaner compared to the others. They've raised less funding and are doing well with that money.  They're also building those B2B [business to business] partnerships, which is a good way to get stability.

What do you think the play will be from traditional banks?

George: The incumbents are doing a lot of really interesting things... Even as a slightly disgruntled HSBC customer it's getting better. They are looking at this space pretty seriously now.

Roxane: At the current valuations I'd be very surprised if the incumbents took out (and acquired) any of the neobanks.

Keep on eye on the British buzz this week:

  • Starling Bank: it's rumoured big announcements are a-coming after a £30m raise.
  • Monzo: the company has lost its treasurer and former deputy chief financial officer. Tom Dolan left to join banking start-up Cashplus, The Telegraph reports. It follows the departure of Monzo's chief financial officer in March.
  • Peer-to-Peer (P2P) lenders like RateSetter: fellow P2P platform FundingSecure went into administration last week. This is the second collapse of its kind in six months and new laws are set to come into play in December to make investors more aware of the risks.