The battle for challenger bank customers continues on the U.S. market

A few weeks ago German online-only bank N26, in partnership with sponsor bank Axos, launched its app in the U.S. to 100,000 customers from its waitlist. Between beta now and a full public launch later this summer, people on the waitlist will continuously be invited to get access to the N26 app. Over the summer, N26 will also launch additional perks and two free withdrawals per month at ATMs nationwide. Shortly thereafter they will also introduce Metal, a premium tier account.

“The US launch is a major milestone for N26 to change banking globally and reach more than 50 million customers in the coming years,” says Valentin Stalf, co-founder and CEO, N26. “We know that millions of people around the world and particularly in the US are still paying hidden and exorbitant fees and are frustrated by poor banking experiences.N26 will radically change the way Americans bank as it has done for so many people throughout Europe.”

Since the initial European product launch in 2015, N26 has reached 3.5 million customers in 24 European markets. 

Currently, N26 is generating over 10,000 new users daily. And now, like competitors Revolut and Monzo, they are targeting the big U.S. market for further expansion.

A big hurdle for European challenger banks is navigating the local regulatory landscape in the U.S. Companies have to gain approval state by state where Europe has approached financial regulation with more flexibility. European banks like N26 and Revolut have used the European Economic Area passport to spread throughout the continent. Through that regulation, firms that are licensed in one of the 27 EU member states can provide financial services in the remaining states without requiring additional authorization. But they will face a different set of barriers in the U.S. 

They can avoid a banking license process by partnering with a FDIC-insured financial institution based in the U.S. And that is exactly what they are doing. Monzo has enlisted the help of an Ohio-based community bank, Sutton Bank, and N26 found Axos Bank as a partner. 

On their quest for new clients the European players also face a few U.S. based challengers:

Moven

Moven, formerly Movenbank, was founded in New York in 2011 by Brett King, author of the Bank 2.0, Bank 3.0 and Bank 4.0 books. Moven's mobile payments system relies on NFC technology, available via contact stickers placed on users' mobile devices. 

Moven is a mobile money service that helps users spend, save, and live smarter. Users can load, transfer, spend, and track money using mobile devices. The company's tools provide users with instant feedback on transactions and spending patterns.

They launched its mobile banking and mobile payment services in 2013 and allow users to pay for goods and services in the United States where MasterCard is accepted. 

Total funding: $47.4M

Simple

Simple is an American direct bank based in Portland, Oregon. The company provides FDIC-insured checking accounts to US Citizens only through a partnership with The Bancorp and BBVA USA and is part of the STAR network for surcharge-free access to around 55,000 ATMs. 

What was initially known as BankSimple was founded in 2009 in Brooklyn. 

In August 2011, the company raised $10 million and later that month, the company moved its headquarters to Portland, where 5 of the company's 17 employees already resided.

The company launched in the summer of 2012 as a limited beta.

By January 2013, the company had 20,000 customers and had processed more than $200 million in transactions. By July 2013, its customers had increased to 40,000 and total transaction values increased to greater than $1 billion. At year's end in 2013, Simple reported processing on average around 13 debit transactions per minute with an overall customer balance of $64 million.

Since 2014, Simple has been part of the BBVA Group, one of the largest banks in Europe.

Simple is an online-only neobank and has no physical branches. Instead, account-holders are issued Visa debit cards and have access to an online banking system accessible through Simple.com or mobile apps for Android or iOS. Simple earns revenue by collecting interest on customer deposits and through the collection of interchange fees.

Varo Money

Founded in 2015, Varo Money is on a mission to redefine banking so it’s easy for everyone to make smart choices with their money. 

Varo offers customers no-cost premium bank accounts and high-interest savings accounts offered through The Bancorp Bank. In one mobile app, they provide customers with tools to develop positive spending, borrowing and savings habits and to achieve better financial outcomes. It offers a debit card, deposit and lending products via a mobile app and will be built around a 24/7 digital financial coach that will give proactive insights, analysis of spending and real-time budgeting.

Varo has been granted preliminary approval for a de novo national bank charter by the Office of the Comptroller of the Currency (OCC), and is working to become the first mobile-centric national bank in U.S. history.

Total funding: $178.4M

Chime

FinTech Unicorn Chime, the leader in the U.S. challenger banking segment, helps members avoid bank fees, save money automatically, and lead healthier financial lives. 

Founded in 2011 and based in San Francisco, California, Chime offers a modern, mobile and connected approach to banking that gives members complete control of their finances. Chime members receive a Chime debit card, a Spending Account, a Savings Account, and a powerful mobile app that keeps members in control. The Chime mobile app is available for iPhone and Android devices and has been featured as one of the best Money Management apps in the App Store.

During the Wells Fargo outage Chime registered 10,000 new bank accounts in just 24 hours. At the time (February 2019) they were expecting to hit a total of 3M registered bank accounts on their platform.

Total funding: $308.8M

Aside from these well funded neo banks, there are also a few smaller players, like Current and Step, focussing on the Gen Z niche for example.

It will be very interesting to see how how the battle on the US market will develop. More updates coming soon!

Regards,

Marcel van Oost