The financial sector has not been adverse to technology, however the monumental push in the past decade by technology startups to disrupt financial sectors, spurred on by governments slackening regulations, has left established businesses struggling to keep up.
Everything from banking to investment to insurance has been modernised by startups, which have utilised the power of the internet and mobile to improve speeds, reduce costs and improve customer service.
One of the key benefits of this technology push has been opening up platforms to people left out. Robinhood’s zero fees have opened the stock market to millions of Americans, NuBank is the first bank for millions of Latin Americans and in China hundreds of millions of people have swapped cash for mobile payments.
Alongside opening financial services to more people, it has also given established operators a kick in the backside. In the UK, the ‘Big Four’ banks have all modernised operations, in some cases bringing their entire portfolio of financial services online. In the US, insurance and lending services have been forced to lower fees and accept requests at a faster rate, to keep up with newer platforms running on a far lower overhead.
While the potential of these insurgent apps is limited in the US and Europe, where the majority of the population have bank cards and insurance, in China and Latin America, these fintech startups are the primary supplier of financial services.
In China especially, Alibaba and Tencent have overtaken the major banks as the primary supplier of payments, lending and investment. Due to the lack of financial infrastructure in China pre-mobile, Alibaba and Tencent have forwarded the country by decades in mobile payments adoption and other banking services, which are now seen as critical to the country’s economy.
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Mobile Payments App Market
Alternative payment solutions utilising mobile devices were kickstarted in the West with the introduction of Apple Pay in 2014, which remains the most popular mobile payments service outside of China. Inside the walled garden, Alibaba and Tencent have carved out a market of equal size to the entire West, which uses QR codes to pay for almost anything.
Top Mobile Payment Apps
|AliPay||Ant Group, the financial giant spun-out of Alibaba, is responsible for the most popular mobile payment app in the world, AliPay|
|WeChat Pay||Not far behind AliPay is WeChat Pay, also known as TenPay or WePay, which plugs into Tencent’s massively popular WeChat platform|
|Apple Pay||Introduced in 2014, Apple Pay kickstarted mobile payments in the West. Apple has since rolled it out to Watch, iPad and MacBook|
|Google Pay||Launched a year after Apple Pay, Google’s mobile payment service has been plagued by several rebrands and competition from other OEMs|
|PayPal||The most popular online payment service in the West added in-store QR payments recently, which is accepted in thousands of US stores|
|Samsung Pay||As the leader in mobile sales, Samsung has been able to build out its own service on Android, which is a market leader in several countries|
|Venmo||PayPal’s subsidiary Venmo has led the way on P2P mobile payments in the US, responsible for $12 billion in transactions in Q1 2020|
|Cash App||Square launched Cash App as a direct challenger to Venmo, and it has put in a good performance, with over 30 million users|
Global Mobile Payments Revenue
Almost all lead mobile payment services take a slither of each transaction made on the platform, but as hundreds of billions of transactions are made everyday, those small percentages begin to add up.
Projected Global Mobile Payments Revenue
Mobile payments are expected to grow at a rapid pace in the next five years, registering a 250 percent increase in revenue from 2020 to 2025. The adoption of mobile payments is still low in some European countries (see graph below), we expect a large amount of the next five years of growth to come from these regions.
Global Mobile Payments Users
Similar to revenue, mobile payment usage has primarily come from China, where market penetration is much higher. To put this in numbers, in 2019 mobile payments surpassed one billion users, over half of which are located in China.
Mobile Payments Users by App
|Mobile Payment App||Users|
|WeChat Pay||550 million|
|Apple Pay||220 million|
|Google Pay||150 million|
|Samsung Pay||100 million|
|Cash App||30 million|
As we mentioned in the previous graph, over half of all users are located in China, on the two most popular mobile payment services, AliPay and WeChat Pay. These are operated by Alibaba, which runs Taobao and Tmall (the largest e-commerce platforms in the country) and Tencent, which owns WeChat, the messaging super-app which embeds e-commerce platforms like Pinduoduo and JD.com.
In the West, Apple Pay has managed to surpass Google and Samsung, despite Apple only having ten percent mobile market share. Google has been unable to generate much market cohesion, with some operators not adding the functionality for mobile payments, and others (like Samsung) building their own rival service.
Mobile Payments Adoption by Country
In comparison to the rest of the world, China is a fair few years ahead in mobile payments. In cities, adoption rate is over 90 percent, while in rural areas over half use mobile payments. Applications such as Pinduoduo, which were originally built for tier three and tier four cities, have been responsible for massive outreach into areas older applications couldn’t reach.
At the bottom of the table are France and Germany, two countries that have over 80 percent mobile adoption, but where payments haven’t caught on. Regulatory trouble alongside consumers wanting to use national banks and operators are two of the main reasons why adoption is so low, and why it may take a different approach by Apple and Google to engage consumers in these countries.
Banking App Market
Anyone that tried to bank online pre-mobile will remember the dreadful user interfaces, bizarre sign-in methods and inability to access key services. In the mid-2010s, most of the neobanks leading the way today launched, offering nothing more than a user friendly mobile experience. It worked, millions of people have switched in the past five years to a neobank, and we expect millions more will as these platforms add more services.
Top Banking Apps
|Chime||Largest neobank in the US, with eight million active accounts. Includes a free $100 overdraft, the ability to pay two days early and automatic saving feature|
|MoneyLion||Comes with all of the key features Chime offers, but also has a credit builder loan, which is designed to improve credit rating. Has over five million active users|
|SoFi||A more thorough financial service than the two above, which offers student loans, repayment plans, investments, mortgages and insurance to people who may not be accepted at traditional banks|
|Revolut||Originally built to make transferring money cheaper, Revolut has become a financial super-app, with a current account, rewards, savings, investment and cryptocurrency exchange|
|N26||Germany’s most popular neobank bank, with five million members. The app is available in 25 European countries, but recently backed out of the UK due to Brexit|
|Monzo||Monzo has led the way for challenger banks in the UK, with over four million users in the country. It integrates third-party loans and savings from OakNorth and Charter Savings|
|Starling Bank||While less active in Europe, Starling has made a significant dent in the UK banking industry, with 1.7 million customers who deposit over £1,000 a month in their accounts|
|NuBank||NuBank is the most popular neobank in Latin America, with 25 million users. It has built customer confidence with zero fees and solid interest rates, which is a rarity in Brazil|
Banking App Revenue
To interest people, neobanks have removed a lot of the fees and charges usually associated with banking. While they can compensate by not having to run physical branches, it also means that revenues are not anywhere close to established banks.
Most neobanks are attempting to branch out from current accounts, into more lucrative forms of banking like savings, investments, loans and mortgages. We expect to see more of this behaviour, as neobanks morph into financial super-apps with dozens of functions.
Note: WeBank and MYBank revenue not included. Also not included are any offshoots of established banks.
Banking Revenue By App
|Starling Bank||$40 million|
SoFi’s lead can be deceptive, as most of its revenue is generated from student loans and repayments. Most of the rest generate revenue from interchange and other rather low-yield systems.
Revolut and Chime have both branched into investment and cryptocurrency, which has generated a ton of revenue for Square’s Cash App. As said above, we expect all neobanks to branch into higher yield markets in the near future.
Banking App Average Deposit vs Revenue
Chime is in the strongest position, with a healthy amount of revenue and a decent average deposit. Monzo, N26 and Revolut still suffer from being the “second account”, used primarily for sending money to people.
Starling, which has marketed itself as an actual bank and not a revolutionary app, is the primary bank for most of its customers.
Note: N26 and NuBank average customer deposit is estimated.
Banking App Valuations
|Starling Bank||$0.8 billion|
MoneyLion and Starling, which both appear content with their own country, may not be valued as highly but are building loyal customer bases.
Note: Starling Bank valuation is estimated.
Banking App Users
|Starling Bank||1.7 million|
NuBank is seen as a revolutionary tool in Latin America, especially in countries like Brazil where the interest rate is very high and banks like to sneak a lot of hidden fees on every transaction. It already has five percent market share in Brazil, and the established banks are beginning to block NuBank transfers and other interactions, in the hope of slowing it down.
Revolut, which operates across Europe and is more known as a currency exchange tool, has seen massive user growth over the past two years. It also recently added investment and cryptocurrency exchange to the platform, making it a financial super app of sorts.
UK Challenger Banks
In the United Kingdom, neobanks are labelled challenger banks and have been broadly welcomed by the UK government. The leaders in the field are Monzo, Revolut and Starling Bank, although Atom, Monese, Cashplus and Tandem Bank are all fighting for market share.
UK Challenger Banks App Revenue
|UK Challenger Bank||Revenue|
Revolut is active in more countries than Monzo and Starling, it also has more active users than the two others. Monzo is more popular than Starling, but Starling customers typically deposit more on a month and do not have a second bank account.
UK Challenger Banks App Average Deposit
|UK Challenger Bank||Average Deposit|
Starling has spent the past few years pushing itself as a new bank, but not a revolutionary tool like Monzo and Revolut. It seems to have worked, as more of its customers are depositing entire paychecks, instead of using it as a money management app.
UK Challenger Banks App Average Contribution
|UK Challenger Bank||Average Contribution|
All three banks use interchange as their primary form of revenue, which has only recently started to generate revenue per user for all three. In 2018, all three were losing money per customer, due to the low amount of transactions and small amount spent on their platforms.
Online Trading App Market
Robinhood set off a wave of new trading platforms which aim to make buying stocks affordable for everyone. In the past two years, most trading platforms in the US have lowered commissions and fees to compete with Robinhood.
On the other side of the online trading world, Bitcoin is mined, bought and sold on global exchanges everyday, alongside other cryptocurrencies. Binance, Coinbase and Kraken lead the way as exchange houses and test beds for new coin introductions.
Top Online Trading Apps
|Robinhood||A trendsetter when founded in 2013, responsible for moving most of the major online trading platforms in the US to zero commission. May IPO early next year|
|Cash App||Square’s Cash App has become a juggernaut for Bitcoin trading, on track to net the company $3.5 billion in revenue. It also offers commission free investing with a variety of US stocks|
|Revolut||Nikolay Storonsky, Revolut’s founder, has loaded the app with dozens of features in an attempt to make it a “superapp”. This includes zero commission trading and cryptocurrency exchange|
|Coinbase||The most popular US cryptocurrency exchange, Coinbase has built a platform for crypto be integrated into payments solutions and e-commerce websites|
|Binance||Surpassed Coinbase in 2018 in trading volume, making it the largest exchange in the world. Seen as the more advanced of the two major exchange platforms|
|Kraken||The fourth largest cryptocurrency exchange in the world and considered by some to be the safest. Responsible for the fund recovery of Bitcoin exchange Mt. Gox|
|eToro||One of Europe’s largest fintech brokerages, which focuses on social trading. Users can copy portfolios of successful investors, and also invest in cryptocurrencies|
|Freetrade||A Robinhood alternative for the UK, which has amassed over 200,000 users since launch. The app founders add new stocks every week and recently launched a Stocks and Shares ISA|
Online Trading Revenue by App
|Cash App||$1,100 million|
Cryptocurrency exchanges and investment trading platforms generate revenue in different ways. For cryptocurrency, small exchange, trading and withdrawal fees are the backbone of their income, while some also charge for holding large quantities of currency. Investment platforms such as Robinhood and Revolut generate most of their income by selling trades to “market makers”, which bundle the investments for a better end trading value.
As Cash App and Revolut both offer cryptocurrency and investment platforms, it is clear which one generates more income, crypto. Of the $2 billion in revenue Square made from Cash App in Q3 2020, $1.63 billion was from Bitcoin.
Note: Coinbase revenue is estimated. Robinhood revenue is Q1 2020, Q2 2020 and projected revenue for next two quarters.
Online Trading App Assets Under Management
|Online Trading App||Assets Under Management|
As the world lead in cryptocurrency, Binance has far more assets under management (AUM) than the other three exchanges. Robinhood’s AUM may be far higher than its 2019 value by now, as millions of Americans joined the platform in 2020.
In comparison to major banks and currency exchanges, the AUM of these fintech platforms are far lower. Charles Schwab, for comparison, has over $3 trillion AUM and HSBC held $517 billion AUM for institution investors.
Online Trading App Peak Trading Volume (24 Hours)
|Online Trading App||Peak Trading Volume|
All three cryptocurrency exchanges have seen peak volume records in 2020, as Bitcoin continues a steady climb to its 2018 crash value of $19,700 per coin. We may be in the midst of another “bubble”, according to some experts, although Bitcoin is far from the only coin of precedence on the market now, with Ethereum, Ripple, Litecoin and Monero all seeing large trading activity.
Online Trading App Valuations
|Online Trading App||Valuation|
|Cash App||$35 billion|
The explosion of revenue generated by Cash App in the past year has vaulted Square’s valuation to close to $100 billion. Square generated $4 billion in revenue in 2019, it generated $3 billion in Q3 2020, more than half from Bitcoin exchange.
Binance holds the title for the fastest profitable startup to reach unicorn status, receiving a $2 billion valuation within six months of operation. We estimate that the value has increased six-fold since, as it surpassed Coinbase to be the most popular exchange.
Robinhood’s acceleration from $7 billion to $11.2 billion in less than two years comes from the positive financial results in the first two quarters of 2020, as it generated more revenue than the last four years combined.
Online Trading App Users
|Online Trading App||Users|
|Cash App||30 million|
Even though Binance is considered the most popular cryptocurrency exchange, Coinbase is still believed to have more members, who spend a lot less time and money on the app. Kraken, considered the fourth largest exchange, has built up a solid user-base, through its consistent focus on security.
Robinhood has surpassed brokerages like E-Trade in users, but still lacks the investment size, due to its average user age being under 30.
Note: Square’s Cash App and Revolut userbase is primarily made up of people using banking and payment services.