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by Yap Heng Kiong
In June 2016, Number26 (N26) issued standard account cancellation notices to several hundred customers based on what is known as a Fair-Use Policy. N26 is a Digital-only bank with a full banking license to operate in Europe.
In the email notices sent to their customers, N26 cited, amongst justifications such as suspicious activities, customers using their services too much as being the reason for their account closures.
In another article, "Here's the huge question facing fintech startups - can they make any money?", the author questions the profitability of these Fintech startups. Many startups charge low transaction fees or zero commission in their attempts to capture market size and increase revenue. Have Fintech companies such as N26 reached a point where the highly subsidised service fees can no longer sustain their business?
The business models of most Fintech startups are in collecting transaction and service fees, through payments, lending and investments, and/or commissions by referring customers to business partners.
Most Fintech startups, though offering new products and services over newer platforms such as the Internet and mobile apps, still incur transfer and debit costs just like the traditional financial services. Hence, if even bigger Fintech startups aren't making real profits, what can the other Fintech startups do to overcome challenges to stay profitable? Are these Fintech startups trying to grow as big as they can, and then later try to make money from the customers they have captured? Benoit Legrand, fintech head of Dutch bank ING, told BI earlier this year: "They’re flourishing everywhere but we’re still waiting for the business model to show up. Where is the money? Where is the return?"
In a heavily regulated banking industry, are Fintech startups able to lower costs and maintain profitability and growth? Otherwise, is it only VC money that's keeping some of the fundamentally flawed business models to carry on business as usual?
Most Fintech startups don't make real money. However, we need to ask ourselves, is profitability the sole purpose of all Fintech businesses? There are thousands of Fintech startups at various stages out there. So what do VCs look for in a Fintech startup company when it comes to potential investment? Some VCs only seek for startups with promised 100X returns, while others may look at startups with potential for significant growths. To stay profitable even without VC fundings, Fintech startups need the right business model. The million dollar question everyone is asking, is, "What is a right business model?" There is no doubt that the Fintech ecosystem will still continue to grow and cause disruption to the traditional banking and financial services. This disruption will be meaningful if it is able to make positive impacts, such as by bringing financial services to the un-bankables or delivering banking convenience to the communities that would otherwise be left out. However, when the reality of profitability sets in, the sustainability of such Fintech startups remains a question for all.
References:
http://uk.businessinsider.com/how-can-fintech-make-a-profit-number26-monese-2016-6/?IR=T http://www.businessinsider.com/fintech-profitability-report-2017-5/?IR=T https://techcrunch.com/2016/07/21/number26-is-now-a-true-bank-as-it-now-has-a-full-banking-license/
1 Comment
2/27/2024 11:10:39 pm
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