The Global Boom in Digital Banks (sifted.eu) 35
With their savvy interfaces, smart features and oodles of VC money, digital banks have become the poster-child for fintech. There are now almost 300 so-called "neobanks" live worldwide, with nearly half concentrated in Europe. From a report: Meanwhile, new players are continuing to join the ranks, particularly in Latin America, Africa and the Middle East. This boom is being fuelled by ongoing investor enthusiasm for the sector, with neobanks raising over $2bn in venture capital globally this year alone. Customers are also riding the neobank wave. PitchBook estimates that by 2024, 145m of us will be using these apps across North America and Europe alone. To help keep track of the global neobank landscape, we have broken down the key data and trends. For clarity, 'neobank' is defined here as an app that i) offers its own retail banking services (i.e. prepaid, debit, credit cards), ii) launched after 2010, and iii) is mobile-centric. This definition does not distinguish between regulatory status, but it's worth noting that only a handful have official bank licences.
Here is the story of the world's neobanks, as told in numbers. The neobank boom: At its peak? The number of neobanks worldwide has tripled since 2017, climbing from 100 to nearly 300 worldwide. That means, over the last three years, a neobank launched every five days somewhere in the world (!), according to Exton, a consultancy firm which manages a global database of consumer banking apps. In 2019 alone, more than 70 neobanks went live globally. But Cristoph Stegmeier, a partner at Exton, says we may finally have reached a peak, with 2020 seeing a slowdown. "I expect we will see less from now," he told Sifted. He explained this year's launch decline went beyond simply the 'Covid effect' and stems from the growing saturation of neobanks. Indeed, 30 neobanks have been wound down since 2015, according to Stegmeier. Still, the neobank boom hasn't totally stalled. Over 30 neobanks launched in the face of the pandemic, including Zelf, Daylight (a US bank for LGBT+ members) and Tenpo in Chile. Meanwhile, dozens of new players are still planning to go live in 2021 -- including Greece's Woli and France's Vybe.
Here is the story of the world's neobanks, as told in numbers. The neobank boom: At its peak? The number of neobanks worldwide has tripled since 2017, climbing from 100 to nearly 300 worldwide. That means, over the last three years, a neobank launched every five days somewhere in the world (!), according to Exton, a consultancy firm which manages a global database of consumer banking apps. In 2019 alone, more than 70 neobanks went live globally. But Cristoph Stegmeier, a partner at Exton, says we may finally have reached a peak, with 2020 seeing a slowdown. "I expect we will see less from now," he told Sifted. He explained this year's launch decline went beyond simply the 'Covid effect' and stems from the growing saturation of neobanks. Indeed, 30 neobanks have been wound down since 2015, according to Stegmeier. Still, the neobank boom hasn't totally stalled. Over 30 neobanks launched in the face of the pandemic, including Zelf, Daylight (a US bank for LGBT+ members) and Tenpo in Chile. Meanwhile, dozens of new players are still planning to go live in 2021 -- including Greece's Woli and France's Vybe.
As usual, the US lags with banking (Score:3)
One of my relatives uses one of these Internet only banks.
This Internet only bank doesn't do wire transfers.
Think about that for a moment. An Internet-only bank doesn't offer a way to transfer funds to another bank account.
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An Internet-only bank doesn't offer a way to transfer funds to another bank account.
I know of several that do that within the same country, but not via wire. Most do that via ACH, with some transitioning to RTP. International funds transfers typically require wire, though at some point RTP is supposed to cover that.
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If in the US, don't banks have to be FDIC insured?
The short answer is no, FDIC participation is not compulsory. You shouldn't assume that a bank is a participant until and unless you find it in writing somewhere, though most reputable banks use it as a selling point, so it's usually pretty easy to spot. That said, even when a bank is a participant that doesn't mean all funds are insured. Whether your funds are insured depends on the type of account, the amount, and the number of people on the account, with things like checking, savings, and CDs being eligi
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Of course I"ve only heard about these today with this article...
I"m wondering, what's the appeal of these internet only banks over tried and true and insured (like you mentioned) banks?
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Usually lower fees or higher insurance rates.
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Order food, buy a car, shop for everything....why not bank as well.
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Because your money will disappear if too many people try to withdraw money at once?
But seriously, are these neobanks truly not backed by a larger, actual bank, or a big insurance company, or something? I'd like to hear their justification of why anybody should trust them. It's like keeping your life savings in a PayPal balance.
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I've not seen a real bank that didn't offer apps/online to do your banking there too....
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Because people aren't cognizant of the difference? They see the word "bank", and assume it is the same.
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For example, the article mentions Revolut as being one of the bigger players in the
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Your anecdote isn't so much about the US lagging behind the rest of the world, so much as it is about your relative choosing a bad bank, which is something you can find virtually anywhere. I'd wager that most of us have had experiences with bad banks at some point, given that they're hardly a uniquely American experience.
For my part, I also live in the US, but I bank just fine with an Internet-only bank, routinely transferring funds back and forth between it and the accounts I have at other banks. In contra
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I would be interested in how you do this and if the funds are immediately available. Can you send money to someone else's account and, if so, how long does it take?
The fact that a single bank can continue in business without offering wire transfers (which she found essential when buying property) does show that the field lags.
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If they don't have a physical presence, how do you get your cash when you want cash?
Do they piggyback on other banks' ATM systems?
If so, are there fees? This would be a big killer of the idea for me, I don't want to "pay" to get my own money out when I want to.
So, just curious about that.
Also, when you have a problem with an internet only bank....how hard is it to get a real live person on the phone to discuss it?
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If they don't have a physical presence, how do you get your cash when you want cash?
Do they piggyback on other banks' ATM systems?
If so, are there fees?
The bank where I have my checking account (which is online-first, not online-only, since it does have some branches, though few and far between and none near me) is part of a nationwide network of ATMs, so there are tens of thousands available across the US where I can go for free. If I go outside the network my bank will in any given month refund enough to visit an ATM roughly once a week. I believe many online-first/only banks still offer unlimited ATM visits without any fees, simply because they know it'
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Very interesting replies.
May I ask what you like BETTER about the online only banks, the main reason(s) you switched to them vs regular banks, that pretty much all nowadays, offer apps and online options too?
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(Sorry for the super late reply...Christmas craziness and whatnot...)
Honestly, it wasn’t a deliberate attempt on my part to switch to an online-only or online-first bank. I didn’t switch to them because they were online. It was simply a case of being fed up with my previous bank—a traditional one—and finally taking the plunge at a different one I had heard really good things about. That it happened to be online was incidental, not causal. Likewise as I moved funds to another online b
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Your anecdote isn't so much about the US lagging behind the rest of the world, so much as it is about your relative choosing a bad bank, which is something you can find virtually anywhere. I'd wager that most of us have had experiences with bad banks at some point, given that they're hardly a uniquely American experience.
You just highlighted exactly how much US is lagging behind.
In most of the rest of civilised world, banks are regulated, and that includes the services banks must provide, such as reasonable ease to move your money to other banks.
The fact that "bad" digital banks that don't offer wire transfer service can exist in the US (and you even say it is easy to find!) by itself is a testament to how far behind the US is lagging. You say that is hardly a unique American experience, perhaps you could share which digit
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"An Internet-only bank doesn't offer a way to transfer funds to another bank account."
No, it just doesn't do it by wire transfers. Most people have have never used a wire transfer when they send money to another bank.
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Probably because it is so difficult to do with many US-based banks. She was buying a property and the only way to get the money to the title company handling the transaction was wire transfer or cashier's check.
Many banks don't offer a way to send money. That's why services like Venmo exist.
Re: As usual, the US lags with banking (Score:2)
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My bank is bugging me a few times a year to install their "neo-bank" app. The problem is that they do not provide the apk file on their own web pages. They are sending me to the google play store. That is a problem when I do not subscribe to google services. I still think that a bank should provide their application themselves. Regardless whether I have google play store or not.
Anyway, standard internet banking and a debit card is enough for me.
Banks probably do it anyway only to avoid fees to credit/debit card transaction processors. Instead there are internet fees paid by the mobile phone owner. Mobile networks must love this.
What bothers me is that I bet that few, if any, of these banks write their phone apps completely in house and they don't control the install and maintenance. These companies are ripe targets for the malicious app upgrade attack.
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Re: If only they could provide the app themselves (Score:1)
I understand your problem. Iâ(TM)ve asked my bankâ(TM)s Customer Service folks for a stack of punch cards numerous times, and thus far they refuse to accommodate my system.
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Meaningless distinctions (Score:5, Insightful)
For clarity, 'neobank' is defined here as an app that i) offers its own retail banking services (i.e. prepaid, debit, credit cards), ii) launched after 2010, and iii) is mobile-centric
Oh, so we're going to deliberately craft a definition that ignores the thousands of banks that started before 2010 and otherwise fit that description, many of which are already counted among the largest banks in the developed world?
For instance, here's the list of the 100 largest banks in the US [wikipedia.org]. I see Ally at #21. It's actually been around for quite awhile, but it was rebranded as Ally in 2009, and it's notable for keeping their fees low and their interest rates high by not having physical branches. Likewise for Synchrony at #39, which started in 2003. Or what about USAA at #23? With its focus on serving members of the military and their families, it's never had a major physical presence in its nearly 100 years of existence. It started out as a by-mail bank in 1922, later added banking by phone, then moved online, and now uses apps extensively. The half dozen-ish physical branches they have are all located near military bases, as I recall. And those are just three banks off the top of my head, but I don't recognize the vast majority of banks on that list, which might suggest that they aren't the brick and mortar sort of banks that we're used to driving by during our daily commute.
Whoever wrote the article is defining terms to suit their desired narrative, rather than starting with the data and then seeing what story falls out of it. Whenever someone does that, and especially so when they deliberately exclude huge swaths of data before making a claim about a trend, you can be pretty much guaranteed of two things:
1) The data was excluded/redefined/hand-waved away because it refutes their claims.
2) They're being disingenuous and aren't worth listening to.
Online only bank (Score:1)
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Massive Fraud Operation (Score:1)