The Challenger: bunq's Ali Niknam

Ali Niknam, the 38-year-old founder of the Dutch mobile bank bunq, is still contemplating the Brexit vote – and the impact it had on the bank he founded in 2012.

“In the early days when I started bunq, the first country I wanted to go to was the UK,” said Niknam, in a telephone interview, just days after bunq announced its UK launch, joining 30 other European countries including its domestic market of the Netherlands, Germany and Spain it has launched in.

“I actually was in the UK on the night of the Brexit vote. That was a really strange experience because otherwise we would have been in the UK for a long time now.”

Amid a cloud of Brexit uncertainty, Niknam eschewed the UK and opted to launch first in Amsterdam instead.

Fast-forward over three years and bunq has now decided to enter the UK market, in a political environment, in which more clarity was given to the UK’s future when Prime Minister Boris Johnson issued a “do or die” deadline of October 31 for the UK’s exit out of the EU.

Launch in the UK

Running a fully mobile bank, Niknam, born in Canada but from Iranian descent, explains the process that a neo-bank like bunq undergoes when launching in a new market like the UK- saying it’s a two-step process, whereby the app is tailored for individual markets following market research.

Niknam says bunq’s first 2,000 users in the UK will help shape the product, after it was granted FCA approval to operate in the UK.

“We get those first users in,” says the entrepreneur, who founded his first company at the age of 16."

“Really understand what makes them tick, what makes them happy. And then adjust bunq. We look to tailor the product to individual markets,” he says, pointing out payments are “hugely different” across Europe and heavily tied to local culture and customs."

Once agreement on the product offering is thrashed out, bunq will enter phase two, using advertising and other promotional tools to push the product.

Bunq has around 100 staff (including a core team of Amsterdam coders) across 36 different nationalities but for now, bunq will not have boots on the ground in the UK, though Niknam has not ruled this out in future.

Product offering

Initially, bunq, unlike its competitors, is offering euro only accounts, targeting British consumers who spend money abroad, which Niknam admits is a niche market “but big enough to get the initial group of people in”.

It’s not a completely new phenomenon: N26, for example, launched euro accounts in Switzerland, and not Swiss francs. Starling Bank also offers euro accounts. 

And as Niknam points out, sterling accounts could soon follow, as it looks to attract a mix of mobile-bank loving millennials and an older demographic fed up with traditional banks.

“I think one of the more expected changes will, of course, be to someday offer perhaps British pound accounts,” says Niknam.

“I think this is one of the steps we must really take. We don’t want to remain a niche player. We want to become a general applicable useable tool for British people.”

The free bank?

One possible constraint to bunq’s progress in the UK could be the monthly charges for its users- €9.99 (£8.76) for business customers, €7.99 (£7.00) for personal customers-- joining other neo-bank paid services like N26 and Curve.

But Niknam argues bunq is simply being transparent with its customers, pointing to hidden charges with non-fee paying traditional banks.

“I think he reality of the matter is that people are paying today,” he says.  

“You basically get the choice between two things. Either you get an intransparent structure.  Or you get a party that says ‘look one of our core values is transparency, this is what the service costs. This is what you will get, this is what you can expect from us.’”

In fact, bunq’s mission statement is to be “the bank of the free”- be it free from VC funding; free for users to decide where their money is invested; and free from an excessive banking bonus culture.

On the first point, bunq has hitherto been financed by Niknam-who has personally invested nearly €45m (£39m) since 2012-which he says allows bunq to grow at its own pace, but he says VC funding could come at some point.

On the second point, customers can choose via the bunq app where their money is invested: be it personal mortgages, personal lending or investment in green companies for instance.

On the latter, bunq says in 2018 its three-strong Management Board earned an average take home pay of €107,000 (£93,000), a lot less than salaries of high-flying top executives at traditional banks.

Competition

Bunq is entering a UK banking market, which is highly competitive but Niknam is unphased. 

“I don’t see them [neo-banks) as rivals, I see them as peers,” Niknam says, who founded TransIP, the third biggest domain name and web hosting provider in the world before setting up bunq.

“To me we are on the forefront of a new financial sector with new players, new offerings that better match the people’s wants and needs.

“In my view, the fact there are so many rivals in the UK is an indication that people are more open and more ready for this change towards the future. If you ask me, there are too many traditional banks, rather than neo-banks.”

Niknam will be hoping that bunq’s simplicity of use- users can set up accounts in five minutes with phone and ID- its real-time notifications, open API, partnerships with the likes of Transferwise will help woo customers.

Bunq numbers

Bunq does not disclose user numbers. It says the number of user deposits is €211m (£184m) as of December 2018, saying the amount of user deposits doubled year-on-year.  This is lower than rivals, like Monzo which has listed deposits earlier this year at €716m (£624m).

Niknam also points out the Netherlands- which he says is recognised as one of the toughest regulatory markets in the world- is one of bunq’s most flourishing markets.

Bunq lost around €11m (£9.6m) last year but Niknam says the service “is sustainable” and bunq is in a “healthy” state.

“I want bunq to be around for the next decade and the decade after that,” says Niknam.