The three largest European digital banks have over 18 million registered users combined. That number is predicted to soar to over 23 million by the end of this year, according to a writeup by Finanso.
Today, Revolut (UK) is the biggest at over 10 million users followed by N26 (Germany) with more than 5 million users and then Monzo (UK) at 3.6+ million customers.
This rapid growth has been fueled by pre-COVID-19 venture capital and consumer demand. Revolut closed on a $500 million Series D funding round at a valuation of $5.5 billion. The timing was perfect as it happened in February thus providing a good amount of cash reserves to keep the growth engines churning while the entire world pushes pause due to the Coronavirus.
N26 raised a respectable amount of money during 2019 with Series D of $470 million.
The last round for Monzo was a Series F last summer raising $140.7 million at a valuation of $2.6 billion.
So will this robust growth for digital-only banks continue? Are there possibilities for sector consolidation?
You betcha.
The Coronavirus is schooling us all to avoid unnecessary trips to anywhere. Even the most reticent digital bankers and committed Luddites are having to do online banking or download that bank App to manage their money. Bank branches and extensive real-estate holdings by traditional banks are like a ball and chain for old finance. They are no longer needed.
As for consolidation, expect old finance to target digital bank trailers at some point to add some Fintech cred and eliminate decision by the bank-committee decision-making process that simply takes too long to get things done.
Also, round 2 of digital banking is picking up pace. Fintechs like Zopa or, in the US, LendingClub, are gearing up to put their own spin on the banks of the future that leverage the deep data provided by lending. The winner in all of this is the consumer, of course. The losers are, well, old banks.