FinTech is revolutionizing the landscape of finance, which had previously been held steady for decades. An astounding $53 billion was invested into global fintech startups in 2019. The number of fintech startups is ever-increasing at an unprecedented rate, given the expected future interest in the industry. Some startups are coming up with innovative techniques and approaches to peak the interest of the investor, and penetrate the market. Four startups are expected to keep attracting new customers into 2021. Take a look at what fintech startups you should follow closely this year.
1) Robinhood – Fintech Startup Of 2021?
Similar to the Robin Hood figure, who aimed to re-establish equality, the Robinhood fintech startup aims to allow easy access to exchange from lower-income investors. The company ethos is to “provide everyone with access to the financial markets, not just the wealthy”. Robinhood was founded in 2013, offering an online platform for trading stocks, options, and EFTs, alongside crypto. Robinhood offers a zero-fee policy, as all trading has no hidden costs or commissions attached, thus enticing a large audience of users, especially those with lower incomes.
13 Million Users And $11.7 Billion Valuation
The concept of no trading fees, or any account minimums, has attracted 13 million users, fuelling it to an $11.7 billion valuation as of 2021. Trading with traditional brokerages incurs fees of around $5 to $10 per trade, alongside account minimums between $500 to $5000. Most of the customer demographic belongs to the millennials, with an average user age of 26.
Robinhood is not without its controversies, as it has been claimed to disguise itself as a fun game app, being accused of ‘gamification’. However, it has a large audience backing, which is expected to increase into 2021.
2) Monzo – The Most User-Friendly FinTech Startup?
Monzo is a well known online bank, based in the United Kingdom, founded in 2015. It set the historic record for the ‘quickest crowdfunding campaign’ in 2016, raising £1M in a mere 96 seconds. Head of research at Financial Consultancy 11:FS, Sarah Kocianski, said “The technology was there, so they could operate for cheap. People were ready, everybody had a phone in their pocket, the regulators were ready. Monzo just made the biggest splash, partly because it was the loudest and partly because of the speed of customer acquisition”.
Monzo is a very user-friendly app and has new features such as ‘salary sorter’, which separates your money between savings, spending, and bills, eliminating the over-expenditure. Online finance can seem daunting, thus its user-friendly interface has attracted a very large audience, extending many demographics. Its client base, with over 4 million customers as of March 2020.
Client Based More Important Than Achieving Profitability
Establishing a large client base has been set as a priority, higher than the need to achieve profitability. In July 2020, financial reports showed a net loss of £113.8M, which was substantially higher than the £47.1M in loss from the previous financial year. Furthermore, Monzo saw a 40% valuation decrease in light of the coronavirus. Monzo remains optimistic about its efforts to penetrate the United States market, which is expected to offset some of the losses incurred by the pandemic.
Monzo is expected to drive innovation into the year, being a trusted online bank provider to millions into 2021.
3) TransferWise – Disrupting The Money Transfers
TransferWise revolutionized overseas money transfer, supporting over 750 currency routes. Moving money across borders generally incurs fees, but TransferWise uses separate money pools for each currency, directing funds from different pools. The company uses mid exchange rates, alongside small commission fees, which is highly attractive in comparison to traditional currency transfer, in which differences in buying and selling are taken as a commission by the broker. TransferWise is 83% cheaper than the largest four United Kingdom banks, in terms of its currency routes.
One Of The Few Profitable FinTechs?
Profitability is typically rare among FinTechs, despite the high volumes of transactions. Despite the pandemic, TransferWise reported $26M in profits in 2020, higher than $12.9M in 2019. Monzo, N26, among other fintech banks has integrated TransferWise into their bank architecture. Its presence will likely be seen far-reaching into 2021.
4) N26 – Most Prominent European Neobank
N26 is one of Europe’s most prominent neobanks, established in 2013 and based in Germany. Its main ideal is targeting the millennial generation, with bold German advertisements such as ‘not your grandfathers’ bank’. Therefore it’s no surprise that its policies are geared towards millennials, such as the zero cost set up of freelance contractor N26 Business accounts.
Recently, N26 ceased operations and accounts within the United Kingdom since April 2020, subsequent to Brexit developments. N26 EU based bank license was invalid within the UK borders, igniting its withdrawal. Losing a large audience was counterbalanced by the recent launch into the US market in 2019, partnering with Axos bank. It has a $3.5 billion value.
N26 has no monthly fee and charges no fees for transactions, or foreign payments. However, ATM withdrawals in foreign currencies incur a 1.7% fee.
Attracting Customers Preferring Stability
Competitor banks like Monzo frequently change their interface and technological landscape, with the constant addition of new features. N26 does not constantly overwhelm customers with new features, thus attracting users who prefer stability.
New FinTechs are entering the technological sphere constantly, and the industry is evidently ballooning. All startups are innovative, providing easier, cheaper, and faster access to financial services, thus collectively disrupting the longstanding architecture of traditional banking. Although COVID-19 somewhat pressed the foot brake in the fintech progression, it is clear that the industry is resilient to such disruptions, and expected to continue far beyond 2021.