AltFi’s 10 most read stories of 2019: Part 2

By John Reynolds on Tuesday 31 December 2019

Alternative LendingDigital BankingSavings and Investment

We list the five stories that were most popular with readers over the last 12 months—including stories on Monzo, Starling Bank and new European rules impacting contactless payments.

AltFi’s 10 most read stories of 2019: Part 2
Image source: Image by Sven Lachmann from Pixabay

2019 marked another action-packed year for disruptive finance, with fintechs occupying an increasing number of column inches on the back of huge funding rounds, new tie-ups and big advertising campaigns as they made fresh inroads shaking up the banking landscape. 

But 2019 wasn’t all good news for alternative finance with peer-to-peer lending enduring a troublesome 12 months. The gaze of the City regulator fell squarely on the sector, which warned of a crackdown on misbehaving platforms, following the high-profile failures of platforms like Collateral and Lendy.

5. Monzo surpasses 50 per cent of UK challenger banking market share

Monzo's dominance in the UK market in terms of active users is not being mirrored in the US, new figures revealed in November.

The figures, provided by analytics firm Apptopia, offered an interesting snapshot of the performance of a handful of digital banks, comparing active user numbers in the UK and US.

One of the key findings is that German digital bank N26 is leading the European challenge on the US market, chalking up nearly 50,000 downloads in September.

This was ahead of Revolut, with over 20,000 downloads, and Monzo with just 6,400 downloads in the US, in the same month.

But the Europeans still have some way to catch US native digital banks, Current and Chime, with 109,000 and 740,000 downloads respectively in September.

By contrast, Monzo is top of the tree in the UK, where it accounts for more than 50 per cent of the challenger banking active user base.

According to Apptopia, all of the top digital banks in the UK are growing their active user base, but Revolut, Starling and N26 are losing ground to Monzo.

Read more: Monzo surpasses 50 per cent of Uk challenger banking market share

4. What went wrong at Atom Bank?

The Durham-based bank is sometimes unfairly labelled as a second-wave challenger bank but was founded in 2014 so has a legitimate claim as the country's first app-only bank.

However, the loss-making challenger bank has been struggling to maintain the pace in its key mortgage market and has repeatedly had to call on core investors for more funds.

Atom and its rivals have added millions of young, web-savvy customers. 

But reports surfaced that Atom's biggest shareholder BBVA might have cooled on the bank and was exploring a takeover of the UK startup. But a later reporter suggested these plans had been shelved, owing to Brexit uncertainty. In July, BBVA was part of a £50m funding round in Atom, contradicting the earlier report about BBVA cooling its interest in Atom.

One of the challenges Atom has faced is its offer of low mortgage rates and high savings offers to attract customers has driven up losses.

Atom's pre-tax losses increased year-on-year from £53m to £80m in the year ending April 2019, according to its most recent accounts.

Read more: What went wrong at Atom Bank?

3. Starling launched a web portal, but there’s a catch

In October, Starling Bank launched its debut web portal to let customers manage their accounts outside of its mobile app, but not all its customers.

The feature was limited to Starling’s business account holders only at launch and, at launch, was not clear whether the web portal would be available to Starling's consumer banking customers. 

It was developed with funding from the £100m Starling won from the Banking Competition Remedies (BCR) fund in February.

Along with its web portal, Starling also revealed that, while developing its own lending products, it’ll also be partnering directly with “leading SME lenders” to enable them to offer loans via the Starling Marketplace.

Other features being developed by Starling as part of its public commitments to the BCR include: “flexible deposit accounts, multiuser card functionality, instant invoicing, VAT management, advanced invoice financing, smart FX, supply chain finance using blockchain-based technology and secured business lending”.

Read more: Starling is launching a web portal in September, but there’s a catch

2. Monzo replaces entire Monzo Plus team and refunds customers after admitting premium service “didn’t go according to plan"

In September, Monzo said it was "going back to basics" after it replacing its entire Monzo Plus team and redeeming customers after admitting its premium service "didn't go according to plan".

The revelation marked a blow to Monzo, which had only launched its Monzo Plus service five months before.

As befits a digital disruptor, the news came out on Monzo's community forum that the Monzo Plus team, current subscription offering and even the Monzo Plus name will be replaced.

“We’re going back to basics and starting from the beginning,” wrote Product Marketing Manager Tom Davies.

“While we are fortunate to see our customer base growing faster than ever, it’s important we take steps now to ensure we’re moving towards becoming a sustainable business.”

Read more: Monzo replaced entire Monzo Plus team and refunds customers after admitting premium service “didn’t go according to plan”

1. One in every five contactless payments now blocked due to new European rules

September saw news of the introduction of new rules which will increase the amount of friction in making a contactless payment.

Digital banks including Monzo and Starling wrote to their customers, telling them about the changes.

Now every five contactless payments, or after a certain value of payments has been reached, a customer's bank card will be declined and customers are asked to enter their PIN instead.

The change doesn’t just affect digital banks, but all banks, and comes about as part of the introduction of Strong Customer Authentication (SCA), a new European regulation intended to increase the security of payments.

As Starling Bank explained: “After you’ve made five contactless payments in a row (or once your payments have totalled £135) your card will now decline and you’ll be asked to enter your card in the machine and enter your PIN.”

The change, officially introduced on 14 September, is expected to cause much confusion both among consumers and retailers, many of whom won’t be aware of the new rules.

Monzo wrote to customers: "This is a big change for retailers, so the shop won’t necessarily know why your card is being declined. But when the reason is an SCA security check, we’ll always send you a notification from Monzo asking you to retry the payment with Chip&PIN."

Disruption was expected to be highest in cities like London, where contactless has become the default payment method in many stores.

Read more: One in every five contactless payments now blocked due to new European rules

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