Fintech startups, particularly neobanks, have long suffered from having great technology, but few customers using it.
Simple and Moven had more innovative offerings than traditional peers, but that didn’t translate to more customers or more revenue. What was BBVA paying for when it bought Simple for $117 million in 2014? It wasn’t the customers, which stood at around 33,000. BBVA later said Simple was growing at 30,000 per month.
But other companies in the space have succeeded in getting more customers, though it’s not always clear what that translates to in terms of revenue. 11: FS’s Sarah Kocianski recently tallied fintech numbers for Forbes, and named the following as having 1 million or more customers:
- Chime (1 million)
- N26 (1 million)
- Revolut (“2 million+”)
- TransferWise (3 million)
- Square Cash (7 million)
- Coinbase (20 million)
This list is not exhaustive. We could add to the numbers above PayPal, with close to 250 million active users — more on active users below. There is also the trading app Robinhood, with more than 4 million users, and Acorns, with 3.5 million.
Kocianski pointed out each of these firms is self-reporting, and the method of counting is not standardized. On this point, Ron Shevlin, director of research at Cornerstone Advisors, told Bank Innovation, “Fintech startups’ self-reported numbers should be trusted as far as you can throw them (which you can’t). It’s not that they’re lying–it’s that the definition of the data elements is not always clearly defined, nor are there generally accepted definitions for those variables (e.g., “customers”) across the industry.”
Banks also self-report mobile user numbers, using the “active user” metric, generally taken to mean an active monthly user or AMU. On this number, Shevlin said that publicly traded banks should not be required (by shareholders or otherwise) to report these numbers, stating, “It’s neither a financial nor operating metric that’s meaningful to the analysis of a bank’s health, profitability, or future.” He added, though, that it might be “nice to know… but should not be required.”
Any service with more than a million users, however, counted, must be considered significant. Crypto enthusiast and payments veteran Mike Dudas, who deletes his tweets, commented that Coinbase will be the FI of record for many millennials in the near future., but that depends on how you view the future of cryptocurrency.
But scale is coming to fintech startups, and wealth management services — many expanding their offerings into the retail banking space — and neobanks with a million-plus customers must give banks pause.Like This Post