The UK has become something of a laboratory for newfangled digital banks, which are attracting thousands of new customers each day. But there are some big questions: Will bigger legacy banks eventually learn the fintech firms’ tricks? And will the so-called neobanks ever become profitable?
Talking about profit when these companies are growing so quickly may seem gauche to some investors, but there’s a lot of venture capital money riding on the answers to these questions. London-based Monzo raised about $145 million last month, while Revolut is looking to take in $500 million or more from investors this year. Berlin-based N26, which also operates in the UK, has raised $470 million so far this year.
London’s business circles were atwitter after an N26 executive told the Financial Times (paywall) that profitability isn’t a “core metric.” Young fintech firms are bleeding cash now as they spend on marketing and licenses for new markets, but some could potentially be profitable on a per-user basis if they weren’t spending so much on customer acquisition. Instead, they’re aiming to become big, global challenger banks.