Beautiful Virgin Islands

Monday, Aug 04, 2025

Europe's digital banks got a 'wake-up call' in 2020. And consolidation could be coming

Europe's digital banks got a 'wake-up call' in 2020. And consolidation could be coming

Investors want fintech challengers to show they can monetize their products and eventually make a profit. Experts say the space is ripe for some consolidation.

In a year when online banking has taken off, you’d think it would be a golden opportunity for Europe’s digital challenger banks to shine.

Research from Mastercard last month found that 42% of Europeans handle their finances digitally more frequently than they did before the coronavirus pandemic, while 62% are thinking of switching from physical banking to digital platforms altogether.

But many of the so-called “neobanks” have stumbled in 2020, with the likes of Monzo and Revolut revealing deepening losses and getting hit with a multitude of complaints from customers about service.

Monzo, whose founder Tom Blomfield stepped down as CEO earlier this year, caused concern after flagging “significant doubt” about its ability to continue “as a going concern” due to disruption from Covid-19.

Now, neobanks are under tremendous pressure to show they mean business. Investors are pushing the fintech challengers to demonstrate that they’re able to monetize their products, and eventually make a profit. Experts say the space is ripe for some consolidation.

“Thanks to this crisis, there has been a wake-up call to some of these neobanks,” Ali Niknam, CEO and founder of Dutch online bank Bunq, told CNBC in an interview. “To run a healthy business, you need healthy business conduct.”

Can the digital banks survive Covid?


For Niknam, not all digital banking upstarts will make it through the Covid-19 pandemic.

“The complexity of having a start-up, having to compete with these gigantic incumbents and having such a heavy burden of regulation is a mix that not many can muster,” he said. “Those who survive this economic downturn will have a great future ahead.”

Like many start-ups, Bunq is itself loss-making, with Niknam expecting the firm to lose around 14 million euros ($18.5 million) this year.

The firm’s founder said he is able to fund those losses with the profit he makes from another company he owns, internet domain name provider TransIP. To date, Bunq hasn’t accepted any external funding from venture capitalists, and Niknam remains its sole shareholder.

Nik Storonsky, founder and CEO of Revolut, agreed with Bunq’s boss, and suggested some firms could become the target of takeovers bids.

“Certain banks won’t be able to survive this Covid thing because they are too reliant on payments and interchange, especially here in Europe,” he told CNBC.

Much of the start-up banks’ revenues come from fees which are generated each time a customer uses their card to make a payment.

“We’ll clearly see some winners and losers in this game in Europe, and maybe some M&A activity as well,” Storonsky added.

Last month, the U.K’s Times newspaper reported JPMorgan and Barclays had shown an interest in buying U.K. digital lender Starling. But Anne Boden, Starling’s founder and CEO, poured cold water on the report, saying her firm was more likely to acquire a lender itself.

“It’s very flattering when you hear rumors about big banks like that,” Boden told CNBC. “For ourselves, we are probably going to acquire something during 2021.”

“Lots of lenders are going to reevaluate their future and we are growing very, very fast,” she added. “We’re always looking for opportunities.”

Tom Merry, managing director of banking strategy at Accenture, said a big bank acquisition of a neobank would be questionable due to “sky high” valuations in the sector, and as many fintechs have struggled to convert their users into primary account holders.


Can they make a profit?


Europe’s neobanks have gained millions of users thanks to offering little to no fees on top of a slick user experience. But they “still lack scale” versus incumbents like HSBC, Barclays, NatWest and Lloyds, Merry told CNBC.

“If the neobanks are able to turn great customer affinity and numbers into revenue growth whilst maintaining their cost advantage, profitability will follow,” he added.

The challengers have been racing to roll out new products in an effort to bring in new revenue streams and edge toward profitability. Revolut, Monzo and N26 all now have premium subscriptions, while some firms have been branching out into business banking.

Revolut, by far the largest neobank in Europe with over 13 million users and a valuation of $5.5 billion, itself broke even for a second time in November, recovering from a sharp drop in revenues at the start of the pandemic.

Starling similarly managed to enter the black in October, eking out an £800,000 ($1.1 million) profit. The company is currently in the process of raising a new round of funding ahead of an anticipated European expansion next year.

“The high street has been replaced by Amazon,” Boden told CNBC. “The analogy is, what’s happened in banking is that the high street banks have been replaced by the digital banks.”

But Alex Zivoder, CEO of children’s banking app Gohenry, said his challenger bank peers shouldn’t shy away from charging for their services. The start-up offers a “Netflix-like” model that sees parents pay a monthly subscription for their kids’ accounts.

“It’s quite difficult to sustain a business just on interchange,” Zivoder told CNBC. “When you have a very clearly-defined, well-understood product with good take-up from customers, they are happy to pay for it.”

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
Tesla Seeks Shareholder Approval for $29 Billion Compensation Package for Elon Musk
Nvidia is cutting prices on its RTX 50-series graphics cards after sales slowed and inventories piled up
Ghislaine Maxwell Transferred to Minimum-Security Prison Amid Ongoing DOJ Discussions
U.S. Tariffs Surge to Highest Levels in Nearly a Century Under Second Trump Term
Matt Taibbi Slams Media for Role in Russiagate Narrative
Pilots Call for Mental Health Support Without Stigma
All Five Trapped Miners Found Dead After El Teniente Mine Collapse
Ong Beng Seng Pleads Guilty in Corruption Case Linked to Former Singapore Transport Minister
BP’s Largest Oil and Gas Find in 25 Years Uncovered Offshore Brazil
Italy Fines Shein One Million Euros for Misleading Sustainability Claims
JPMorgan and Coinbase Unveil Partnership to Let Chase Cardholders Buy Crypto Directly
Declassified Annex Links Soros‑Affiliated Officials and Clinton Campaign to ‘Russiagate’ Narrative
UK's Online Safety Law: A Front for Censorship
Nationwide Protests Erupt in Brazil Demanding Presidential Resignation
Parents Abandon Child at Barcelona Airport Over Passport Issue
Mystery Surrounds Death of Brazilian Woman with iPhones Glued to Her Body
Bus Driver Discovers Toddler Hidden in Suitcase in New Zealand
Switzerland Celebrates 734 Years of Independence Amid Global Changes
U.S. Opens Official Investigation into Former Trump Prosecutor Jack Smith
Leaked audio of Canada's new PM Mark Carney admitting the truth about the Net Zero agenda: "We're gonna make a lot of money off of this."
China Enforces Comprehensive Ban on Cryptocurrency Activities
Absolutely 100% Realistic EVO Series Doll by EXDOLL (Chinese Company) used mainly for carnal purposes
World Economic Forum founder Klaus Schwab: "In this new world, we must accept... total transparency. You have to get used to it. You have to behave accordingly. But if you have nothing to hide, you shouldn't be afraid."
Meet Mufti Hamid Patel, head of Office for Standards in Education in Pakistan
George Soros tells the World Economic Forum: "President Trump is a con man and the ultimate narcissist, who wants the world to revolve around him."
Hamas are STARVING the hostages.
Decline in Tourism in Majorca Amidst Ongoing Anti-Tourism Protests
British Tourist Dies Following Hair Transplant in Turkey, Police Investigate
Poland Begins Excavation at Dziemiany After New Clue to World War II‑Era Nazi Treasure
WhatsApp Users Targeted in New Scam Involving Account Takeovers
Trump Threatens Canada with Tariffs Over Palestinian State Recognition
Trump Deploys Nuclear Submarines After Threats from Former Russian President Medvedev
Trump Sues Murdoch in “Heavyweight Bout”: Lawsuit Over Alleged Epstein Letter Sets Stage for Courtroom Showdown
Germany Enters Fiscal Crisis as Cabinet Approves €174 Billion in New Debt
Trump Administration Finalizes Broad Tariff Increases on Global Trade Partners
J.K. Rowling Limits Public Engagements Citing Safety Fears
JD.com Launches €2.2 Billion Bid for German Electronics Retailer Ceconomy
Azerbaijan Proceeds with Plan to Legalise Casinos on Artificial Islands
Former Judge Charged After Drunk Driving Crash Kills Comedian in Brazil
Jeff Bezos hasn’t paid a dollar in taxes for decades. He makes billions and pays $0 in taxes, LEGALLY
China Increases Use of Exit Bans Amid Rising U.S. Tensions
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Procter & Gamble to Raise U.S. Prices to Offset One‑Billion‑Dollar Tariff Cost
House Republicans Move to Defund OECD Over Global Tax Dispute
Botswana Seeks Controlling Stake in De Beers as Anglo American Prepares Exit
Trump Administration Proposes Repeal of Obama‑Era Endangerment Finding, Dismantling Regulatory Basis for CO₂ Emissions Limits
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
A family has been arrested in the UK for displaying the British flag
Mel Gibson refuses to work with Robert De Niro, saying, "Keep that woke clown away from me."
×