The Fiery Force of Challenger Banks

Insight into the financial and tech activities of three notable neobanks... Monzo, Revolut and Starling.

The fintech sector makes up just one part of the varied B2B tech landscape in the UK, yet it is an area that is loud, proud and consists of a lively crowd.

The nation’s fintech arena is certainly large in its own right, but standing out are some notable challenger banks – and their financial results and technology.

Digital banks, challengers, neobanks, or however you want to call them, have sprung up in the UK at an incredible rate. They are an interesting mix of B2C, B2B or both. In terms of the latter category, Monzo, Revolut and Starling are a famous trio that launched around the same time and garnered some interest across the country.

Monzo and its Millions

Monzo was founded in 2015 and has 5.3 million users. Last month, it revealed on Twitter that almost 100,000 businesses were using its business account. It launched current accounts back in 2017, and built its own Faster Payments processor. However, it used an “off-the-shelf” gateway, built and operated by a third party. After some outage issues – which affected other banks and firms – it set up its own in-house gateway, which has been running since November 2019.

The bank explains that its tech stack is hosted on its microservices architecture written in Go and managed by Kubernetes, which all runs on Amazon Web Services (AWS). This is the same technology stack it uses to run its bank, which is also built from the ground up. Its mobile banking account is provided via the Monzo app on iOS or Android.

Recently, the digital bank announced it was being investigated by the UK’s Financial Conduct Authority over potential breaches of financial crime regulations. The app-based challenger also suffered a £114.8 million in pre-tax losses last year despite revenues increasing 18% to £66 million.

It’s unclear where it’s headed. The bank’s accountants have indicated there was “material uncertainty” over its future and a “significant doubt” on Monzo’s ability to continue.

The Adventures of Revolut

Revolut was established in the same year as Monzo but its stats look better. Customer numbers around the world went from ten million at the end of 2019 to 14.5 million at the close of last year. Revolut has 500,000 SMEs as business customers, making it a B2B fintech to remember.

While the digital challenger saw annual revenues increase from £166 million in 2019 to £261 million in 2020, its losses have worsened. It reported a £168 million loss for last year, compared to £107 million in 2019. That said, Revolut says it was “strongly profitable” in the first quarter of 2021.

According to the firm, its Android team writes in Kotlin, Android SDK, and RxJava serve as the core libraries and frameworks. For data storage, it uses SQLite with Room OM. It explains that different mobile products have different architectures. The Retail and Junior apps are based on MVP (Model-View-Presenter), and the Business app on MVVM (Model-View-ViewModel). They’re supplemented by its proprietary add-ons.

For the iOS team, it offers three apps: Revolut, Revolut Junior and Revolut Business. It notes that all products are implemented with Clean Architecture and MVVM. The apps are not monolithic and currently have around 60 modules. They include shared modules such as the core module, UI components modules, the chat module, and feature modules like trading, payments, credit and cards. All apps and shared modules are stored in a single repository, Monorepo.

It writes in Swift and uses iOS SDKs. Other tools and technologies include Xcode and a Git client of choice (e.g., Sourcetree), Figma, and CoreData for data storage. Revolut also offers Sherlock, an inspired name for a card fraud detection system, and one that it built in nine months.

Revolut’s fortunes are looking robust. Last month it launched a travel booking feature for its B2C ambitions. It also picked up $800 million (£577 million) in funding, taking its valuation to $33 billion (£23.8 billion).

Starling Seeks to Soar

Founded in 2014 by Anne Boden, Starling was granted a banking licence by the Bank of England in July 2016 and launched its first mobile personal current account in May 2017 (available as a mobile app for both iOS and Android phones). The challenger says it launched the UK’s first digital business bank account in March 2018.

In terms of its tech stack, the bank has developed its core banking platform and mobile apps from scratch in-house. It says its systems are cloud-based and running in AWS and Google Cloud Platform (GCP). In answer to an eWeek UK query about its other tech, Starling wouldn’t reveal who it uses for payments operations and card processing. (It’s not Bottomline Technologies or GPS as found in some parts of the internet.)

In its latest trading update it fared better than Monzo and Revolut. Revenue rose by nearly 600% to £97.6 million, from £14 million for the previous period, ending 30 November 2019, while loss after tax more than halved to £23.3 million from £52.1 million.

Customer account numbers more than doubled to 2.1 million. It explains that it has more than 2.3 million open accounts; 1.8 million retail current accounts, 374,000 accounts for SMEs and 126,000 euro and US dollar accounts.

It broke even for the first time in October 2020 and made a profit each month since then. Boden is in a confident mood – and reckons Starling is “very much on track to post our first full year of profitability” in its 2022 fiscal results.

Starling made its first acquisition last month – when it bought specialist buy-to-let mortgage lender Fleet Mortgages in a £50 million cash and share deal.

This month the bank made it to the top of the charts for business banking on its first time of being included in the Competition and Markets Authority’s tables. These results are from an independent survey carried out between July 2020 and June 2021 as part of a regulatory requirement.

Profit and Honour

The issue of whether challenger banks can survive and compete against the old guard is something that gets a lot of attention and column inches. To keep it brief, and as one example, Accenture’s Global Banking Study (released in December 2020) revealed that only 45% of consumers think challenger banks will exist in a year’s time. That kind of statistic can certainly restrict the growth of a business. Why move banks if your new choice may not even be around?

Monzo, Revolut and Starling are not the only ones who grace the UK’s B2B banking sector with their presence. Honourable mentions should go to Atom, Monese, OakNorth, Tandem and Tide.

But which of these – or another name – will grab the honours in the UK? That remains to be seen.

Antony Peyton
Antony Peyton
Antony Peyton is the Editor of eWeek UK. He has 18 years' journalism and writing experience. His career has taken him to China, Japan and the UK - covering tech, fintech and business. Follow on Twitter @TonyFintech.
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