EMEA Neobank Weekly: Newcomers Seek to Differentiate as UK Grants Fresh Licenses

This week in the news, the U.K is to get two new neobanks as Ashman and Kroo are granted licenses.

Ashman has been issued a banking license “with restrictions” by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).  It announced on its website that it intends to achieve full regulatory approval to take deposits and start lending towards the end of 2022.

Meanwhile, e-money startup Kroo has been awarded a full banking license by the Bank of England, the first company to have received one since Cashplus in February 2021.

But the new banks will face an uphill battle as they seek to grow their customer base in an increasingly crowded U.K. market. With Monzo, Revolut, and Starling all vying for customers in the country, any new entrants need to offer something different if they want to stand out.

So how do the newcomers intend to differentiate themselves?

The Sustainable Lender for Real Estate SMEs

Ashman is an upcoming digital bank that intends to cater to a market that is currently underserved by existing neobanks.

See more: Commercial Real Estate Lender Ashman Granted UK Banking License

Once it goes live later this year, Ashman will provide services to small-to-medium-sized businesses in the real estate and property sector. It will offer lending and savings products with a focus on sustainability using a digital-first delivery model.

According to the company website, the new bank has developed “proprietary digital tools to help businesses understand their environmental and societal impacts and to help them leverage the advantages of becoming more sustainable.”

Kroo Granted Full Banking License by the BoE

Founded in 2016 as an e-money debit card and finance app, Kroo has been granted a full banking license by the BoE and will now start to offer personal current accounts to new and existing customers.

Read more: UK Digital Bank Kroo Granted Banking License

In order to obtain a license from the BoE, a bank must demonstrate that it has met the authority’s standards for corporate management, business viability, risk mitigation and adequate financial resources.

In addition to its existing services, Kroo will now be able to offer customers overdrafts, loans and savings products. In addition, customers of the challenger bank will now be covered by the U.K.’s Financial Services Compensation Scheme for deposits of up to £85,000.

Related: UK Pledges to Change 50-Year-Old Consumer Credit Law

Like Ashman, Kroo is branding itself as a sustainable alternative to its competitors. The young challenger bank provides customers with a fully biodegradable card and promises to plant 20 trees every time an existing Kroo account holder refers a friend.

Other Neobank News

Away from the U.K., Revolut has begun piloting its buy-now-pay-later service in Ireland and has announced that it plans to roll out the service in Poland and Romania by the end of 2022.

More on this: Revolut Pilots BNPL Product in Ireland

The U.K.-based company is the latest neobank to offer customers BNPL after Zopa recently branched into the sector and Monzo introduced the feature toward the end of last year.

Read on: What’s Next in BNPL: Zopa CEO Says Longer Terms, Larger Loans

Although Revolut has a large customer base in the U.K., British account holders will have to wait before they too get access to BNPL from the bank. “We are currently trialing Revolut Pay Later in Ireland, and we have no current plans to bring it to the U.K. at this stage,” a Revolut spokesperson told Verdict. “We’ll update you when we have news around Revolut’s plans for offering Pay Later to the U.K.”

Learn more: EU Neobanks Lean on Innovation, Consolidation to Bolster Growth

Finally, Dutch neobank Bunq announced its financial results for 2021 this week. Gross user fee income for the reported period amounted to 32.7 million euros ($34 million) — 76% higher than the 18.5 million euros ($19.3 million) Bunq reported in 2020.

The latest numbers will be perceived as good news by Bunq’s investors. Despite the proliferation of neobanks in recent years, the business consultancy Simon-Kucher & Partners estimates that fewer than 5% of them are currently profitable.

As the industry seeks a path to profitability, alternative models from new entrants and diversified offerings from established neobanks will help to drive the sector forward.