Many new banks are selling more than their customers, highlighting their transition from a deficit balance sheet to an earnings balance sheet, often referred to as “staying in the green.” However, very few of them actually achieve profitability. Many use arithmetic methods or abbreviations in which it is sometimes very easy to reach their conclusions.
These sparkles, to give confidence to customers and investors, will only last for a short time. The model does not look profitable despite the multi-million dollar injection by US, European and Asian investment funds. The trend towards consolidation: Some new banks are being bought while others are out of business.
95% of new banks are at risk
That note is that of a new report published by Simon-Kucher & Partners, a growth strategy consulting firm. We can read there that of the more than 400 new banks operating at the beginning of 2022, only 5% reached the break-even point. In other words, 95% of the world’s new banks, serving more than a billion individuals, fail to make enough money to cover their expenses and investments.
Analysts then spoke of “superficial” and “superficial” success, predicting that many of these young startups would not survive the current economic conditions. In May, fundraising fell by more than 100 million euros according to figures from Crunchbase, after two years at record levels in the history of venture capital.
For customers, this is not a good sign. There are reports of new banks running in deficit since they closed and they show how such a situation could turn into a nightmare. We think of Swoon, in France, who left hundreds of customers in silence for nearly a year, with no possibility of a refund. We also think of the Wirecard scandal, which forced new banks like Boon to close.
Among the most popular new banks, such as N26 and Revolut, we clearly distinguish in their strategy the importance of becoming profitable. International publishing, new flight and hotel reservations, buying stocks or cryptocurrencies… Companies are multiplying projects in an effort to become environmentally friendly.
In a less honest way, others prefer to opt for rude methods to inflate their numbers. Bonk, the new Dutch bank, bought the Tricount app at the beginning of the month to increase it from 1.1 million to more than 5.4 million customers. Except that Bunq omits to say that its customers have nothing to do with Tricount’s free users, who aren’t necessarily looking to open a new bank account.
Orange Bank, in a very different fashion, did well in October 2020, five months before it announced significant financial difficulties. in this moment, lemon juice An anomaly in the number of clients was detected in the subsidiary bank accounts. From 500,000 to 1.1 million, the bank had 600,000 customers subscribed to a smartphone insurance contract in its Orange Bank customer volume.
Which banks to turn to?
Online banks or new banks, there are many institutions that are shaky and we no longer distinguish much between the two, since the new banks have their own banking license, as is the case with Revolut.
However, in order to be able to trust his bank, it is still better to make an enterprise bet tied to the traditional combinations. In the last quarter, despite the war in Ukraine, groups BNP Paribas (Nickel account, Hello bank!) and Société Générale (Boursorama Banque, Shine) revealed very promising results.
Among the mobile banks mentioned, Boursorama Banque still serves as a model. At the top step on the podium in France, with more than 3.7 million customers (as of March 31), it’s the most solid and also the most interesting thanks to its super complete offering and the least expensive (most Boursorama formulas are free).
Conditions: No Income Requirement – Welcome Cards and Ultim
Annual fee: 0 EUR • Initial deposit: 300 EUR
Check Deposit: ✔ • Cash Deposit: ✘
Monthly cost of the card: 0 EUR
Eurozone Withdrawals: Free • Eurozone Payments: Free
Withdrawals from foreign currencies: 1.69% • Payments in foreign currencies: free
Pay the phone bill
In terms of profitability, Bursurama conscientiously left it in 2016 to make significant investments. But its shortfall is explained only by such colossal sums of introducing new cards, welcome bonuses and a whole host of more modern additional services. Now the bank expects to return to profitability within a year or two. With more than 4.5 million customers at this time, it would have completely turned off the competition.