Growth Wars: Disrupting the Banking Status Quo
A look at three of the challenger banks shaking up the industry
We’ve all been hearing how challenger banks are growing at breakneck speed, leaving legacy banks in their wake. But how fast are they really growing? To get an idea, we looked at several “Top Challenger Bank” lists and chose three big players: Revolut, Monese, and N26. The goal? To answer the following questions:
- Where are the user growth inflection points i.e. where did the banks go from zero to hero?
First, let’s introduce the players.
This German bank, founded in 2013, rolled out its first publicly available banking product in 2015. Starting as a digital interface for Wirecard, N26 is now a full-fledged digital bank offering insurance, credit, and business options in addition to their current accounts.
In 2016, a year after launch, N26 obtained roughly 80,000 new users, growing to approximately 3.5 million users (2019) in 24 countries.
Based in the UK, Monese is an expat bank, serving as a financial gateway for new immigrants to the country. This bank does not require proof of address of credit history to apply.
Like N26, Monese also launched its first product in 2015 and, according to Business Insider, the app had 56,000 users on its waiting list prior to launch. Now, the challenger bank boasts over 1.6 million users in 31 markets.
Of the three companies we followed, Revolut has the most impressive stats. The UK based bank was founded in 2015 and has grown from 81,000 users to upwards of 7 million. The company, available in 36 countries, offers currency exchange for 29 currencies and three crypto currencies in addition to its banking offering.
Question 1: How do leading challenger banks compare to one another in terms of growth?
To answer this question, we looked at each bank’s user numbers over their first three years post product launch and calculated their Compound Annual Growth Rate, CAGR, for that time span.
From the CAGR, we see that Revolut is gaining users faster than the other two players. We’ll look at growth drivers in the next article, but for now let’s compare the three. Because CAGR smooths out fluctuations in growth i.e. any drops or spikes, we can’t get a crystal-clear picture . However, what we can see is that, fluctuations aside, despite being founded two years later than N26 and Monese, Revolut enjoys roughly 20 percentage points more growth than Monese and 60 percentage points more than N26.
To get an overview about how the growth was distributed, let’s look at question two.
Question 2: Where are the growth inflection points i.e. where did the bank go from zero to hero?
To answer this question, we mapped some key numbers for the challenger banks. N26 and Revolut seem to be tracking each other pretty closely until August 2016, with a difference of 1,000 users in December 2015 and around 300,000 during summer 2016. However, after year two post launch, Revolut has steep growth, jumping to 1 million users in November 2017 and never looking back.
In our next article, we will answer the following questions:
· What’s driving Revolut’s growth?
· What role does UK law play?
· How does innovation speed factor in?