The term ‘hipster banking’ has been around quite a while, and both the banks and the term are here to stay.
N26 and Revolut are the two biggest ‘Finetech’ start-up banks available to people in Ireland. Their purpose is to serve up an undeniably slick and “easy” way to bank.
N26 was launched in Germany in 2015 and has since found its way into the wallets of 1.5 million customers across Europe. Revolut is based in England and has over a million users with 75,000 based in Ireland.
So what’s the difference between the two? N26 has a European Banking License while Revolut is backed by the UK Financial Conduct Authority. They have, however, applied for an EU banking license, but this is still in the works.
While it is easy to get into the nuances of these finetech companies, it is much more interesting to see the waves they are making in the financial world.
“The bricks and mortar banks are currently scrambling to start offering the features these Finetech companies have already rolled out,” John Armstrong, editor of Irish Tech News said.
“The disruption has caused a beneficial knock-on for everyone, even those who have no idea why their antiquated banks now want to offer them features they have wished for, for years,” Armstrong continued.
These services are for people who own and use smartphones as the banks have no physical shop fronts. To set up a N26 account you need to have a high-speed internet connection and a willingness to take a Facetime call.
Revolut involves downloading an app and signing up from there. The apps these banks operate on are slick, sophisticated and most importantly, convenient.
“Fintech banks know that you may not be able to do financial transactions during normal working hours, so they are designed for this and they will have support staff that you can talk to after normal business working hours,” Ronan Leonard, a freelance tech journalist explains.
The main demographic target for N26 and Revolut are young adults with N26 pushing advertisements on YouTube that read: “#nobullshit – Banking. But without the bullshit.”
“Banking should be easier than it is. The main reason there is still a clear divide between the likes of AIB and Revolut is that of loans. People need to establish a relationship with banks to allow them to buy cars or houses so for now, these two products will remain separated,” Armstrong said.
This has all played into Finetech banking’s rise. Also, more competition in markets is usually a good thing as it means more variety and lower prices.
According to Visa’s 2017 annual report, people in Ireland are now making 3 million contactless payments a week. With that being said, Bank of Ireland is still to set a date for when it will support contactless Apple and Android payments.
“If legacy banks and financial institutions don’t adapt to what the modern customer wants they will start losing customers left, right and centre. They will have to adapt or die and so far I don’t see them adapting enough but they still have time to do this,” Leonard said.
N26 has said in 2017 it was gaining 1,000 customers a day with its ‘Black Account’ option supposedly very popular with frequent flyers as it doesn’t have additional charges for using ATMs while abroad.
According to N26: “The only fees on this are a €2 ATM withdrawal fee if you make more than 5 ATM Euro withdrawals in a month. The €2 fee does not apply to non-Euro ATM withdrawals – but there is a 1.7% fee for all non-Euro withdrawals.”
This fee compares quite well with the “main” Irish banks, who all charge around 3.5% for non-Euro cash withdrawals.
N26 has a European Banking Licence which means that funds up to €100,000 are guaranteed by the German Bank Guarantee. Revolut is still waiting to get its European license but it is backed by Lloyds Bank.
“As far as I am aware some of these Fintech banks are as secure as legacy banks. One example of this is Revolut who use Lloyds Bank to provide banking services, and is now worth over $1.7 billion,” says Leonard.
The interesting thing about this new era of banking is that there are no physical branches, no ATM deposits and no human faces, bar, maybe, those viewed through a screen.
These Finetech companies are really trying to represent their #nobullshit notions by throwing their hipster weight around.
An example of this is how you can use and store some of the major online currencies like Cryptocurrency, Ether and Litecoin on Revolut through their ‘Vaults’.
“All banks want physical money to die and contactless payments have facilitated its near demise. The Fintech pseudo banks are already operating without it so it’s only a matter of time before it becomes the default method of payment,” Armstrong says.
A completely seamless banking operation is closer than could have been anticipated.
The main thing separating these new banks and the legacy banks, is their ability to loan out mortgages. But, what is to stop this being done over a phone call. A lot of loans can be secured this way already.
“Can the old banks change quick enough before the ‘new’ banks find a reliable way to provide mortgages? Time will tell but I doubt it. Peer to peer lending has already proved itself in businesses so consumer loans will be imminent,” John concluded.