Two of Europe's most popular digital banks are now eyeing an expansion into the United States as part of their push to penetrate global markets. Germany's N26 and UK's Monzo have revealed plans of offering their services in North America after having successfully established their presence in Europe.
Both digital banks currently have millions of account holders in Europe, mostly young professionals attracted by the bank's offer of free accounts and their easy-to-use app-based platforms.
Unlike traditional banks, accounts opened with these digital banks are relatively quick to set up, mostly taking just a few minutes via their respective smartphone apps.
Monzo currently has more than 2 million customers in Europe and the bank is reportedly adding around 200,000 new users to its platform each month.
The digital bank is known for its flashy debit cards and its excellent customer services. Meanwhile, Berlin-based digital bank N26 reportedly has around 3.5 million users, mostly attracted by the company's innovative and easy-to-use smartphone app.
N26 is currently valued at around $3.5 billion and has the backing of PayPal co-founder Peter Thiel and Hong Kong billionaire Li Ka-Shing. Monzo is currently valued at around $1.3 billion and is backed by American investors including Joshua Kushner of Thrive Capital.
Monzo and N26 both offer customers free ATM withdrawals and both banks don't charge any fees for opening accounts. Customers can easily open their accounts through their apps, with identity verification done via video calls.
Despite their ambitions, analysts predict that digital banks may have a hard time winning over American consumers. This is mainly due to stiff competition in the United States, which is now being flooded by similar services offered by established banks and US tech giants.
To become competitive in the United States, both Monzo and N26 are planning to establish partnerships with US banks. Through these partnerships, digital banks will be able to enjoy the same deposit insurance as any other US banks.
Digital banking is quickly becoming a popular option for most young people in the country, given the myriad of features they offer and the lack of fees such as minimum balance fees. The apps they come with also make it very easy to track spending and budgets, when compared to traditional passbooks and bank accounts.
However, the US has had its share of innovative online-only banks in the past. During the dotcom boom, several digital banks were launched in the US.
These banks quickly disappeared, mainly due to the lack of interested investors and security concerns. US customers apparently also prefer to have face-to-face interactions for their financial decisions, a feature that digital banks simply do not offer.
