Berlin-based N26 and its UK rival Monzo are among the two most popular online banks in Europe and the companies are now eyeing a market share in et United States.
These banks offer free accounts to users which can be opened up within a matter of minutes on a smartphone. The banks have already signed up millions of young professionals in Europe. The apps of these online banks that have a multitude of innovative features that are not offered by the traditional banks, have gained popularity in the region. While not charging any fees, these banking apps also make it easier to set a budget for a user.
However analysts and market experts say that despite the many innovative features offered by these online banks, they are slated to face intense competition in the United States, primarily from the established banks as well as giants from the tech industry that are eager to gain a foothold in the sector.
And therefore according to experts, these European online banks will need to enhance their same to succeed in the US.
The flashy coral debit card and an acute focus on customer service is what made Monzo popular in Europe. The bank currently has over 2 million customers and claims to be adding on another 200,000 customers every month. On the other hand, N26 claims to have 3.5 million users for its slick German app design.
Powerful budgeting tools are offered by both banks which allows their customers to set a budget and track what they are spending by bifurcating money within separate buckets within the same account. The banks also allow free ATM withdrawals to their customers and a hassle free account opening process wherein customers can simply sign up in the app itself and get their identities verified by a video call.
Analysts feel that the banks would get a market advantage in the US because of these features.
However despite the digital advantages, a section of European customers still point out to the drawbacks of such as banking system. For example, many customers would still like to talk to a banker in person when seeking a loan such as a mortgage.
It is this case that has caused some problems for the banks – especially N26, because it do4es not have a customer service system where customers can call and talk to representatives of the bank. Users instead have to interact with the bank over a chat portal within the app. Recently the German government also ordered the bank to enhance its systems to stop money laundering and terrorist financing.
Critics of the European online banks say that their popularity resembles the springing up and proliferation of such online-only banks in the US during the dot-com boom, which later simply disappeared.
“My view is it’s going to be like the late 90s,” Joseph Dickerson, an analyst with Jefferies Equity Research, said. “This is just a repeat of the last movie.”
The online only banks have the drawback of a very limited customer engagement opportunity in comparison to those established traditional banks that offer telephonic and branch customer service, said Dickerson.
(Adapted from CNN.com)