UK digital bank serves clients shunned by big lenders

Monese has expanded to 31 nations in Europe with two million customers in only five years of operation. (AFP)
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Updated 23 February 2020

UK digital bank serves clients shunned by big lenders

  • In Britain, about 80 percent of Monese customers are foreigners whose salary goes directly into their account

LONDON: Among Britain’s digital app-based banks that are attracting moneyed urban millennials is Monese, which also courts customers neglected by the country’s established lenders.

In early 2000, Estonia-born entrepreneur Norris Koppel arrived in Britain and spotted a major gap in UK banking for newly arrived foreigners who had trouble opening traditional accounts.

Koppel was snubbed by banks owing to a lack of address documents and no credit history — and vowed to help those in a similar predicament.

In the nation’s booming financial technology or fintech sector, mobile phone app-based “neo-banks” such as Revolut, Monzo and Starling have established themselves as plucky upstarts.

Koppel’s lender Monese joined them, expanding to 31 nations in Europe with two million customers in only five years of operation.

“Investor trust in Fintechs and the amount of investment being poured into neo-banks is actually very significant; it hasn’t really slowed down. 2019 was definitely a peak point so let’s see how 2020 goes,” Koppel said.

“It’s very clear that banking is going through fundamental changes . . . and there are a group of neo-banks including Monese who are on top of that wave.”

The company describes itself as an electronic money institution that provides banking facilities — but it does not currently offer credit. “Monese is built for people who are moving to a different country, starting a new life, finding a better job, retiring, going for studies, or getting married somewhere else,” Koppel said.

In Britain, about 80 percent of Monese customers are foreigners whose salary goes directly into their account. Groups such as Monese that only operate online carry out checks to verify the identity of new applicants to help fight money laundering. The app aims to compete with Revolut and Monzo, which have eight million and three million customers respectively in a fiercely competitive market.

Monese expects to turn a profit by 2021. It has a global workforce of roughly 400 people, describes itself as the “Uber of banking,” in reference to the popular ride-hailing app. “It’s a good comparison,” Koppel said, noting that it was used by a lot of gig-economy workers at Uber and takeaway delivery service Deliveroo.

Britain’s traditional banking sector, which is still reeling from the 2008 global financial crisis and a string of product mis-selling scandals, retains a strong grip on personal banking, experts say.

Warwick University’s Andreas Kokkinis, who specializes in corporate law and financial regulation, said that fintech was gaining a foothold however.

“The six biggest UK banks have 87 percent of the market share for current accounts so the remaining 13 percent is split among smaller conventional banks and building societies, and challenger banks,” he said. “However, challenger banks, which operate exclusively online and thus offer cheaper services, are popular among customers below the age of 37.”

UK retailer Debenhams goes into the red again

Updated 10 April 2020

UK retailer Debenhams goes into the red again

  • Debenhams’ 142 UK stores are closed with Britain in coronavirus lockdown

LONDON: British department store group Debenhams went into administration for the second time in 12 months on Thursday, seeking to protect itself from legal action by creditors during the coronavirus crisis that could have pushed it into liquidation.

With Britain in lockdown during the pandemic, Debenhams’ 142 UK stores are closed, while the majority of its 22,000 workers are being paid under the government’s furlough scheme. It continues to trade online.

The retailer went into administration for a first time in April last year, wiping out equity investors including Mike Ashley’s Sports Direct, and is now owned by a lenders consortium called Celine UK NewCo. 

Debenhams said administrators from FRP Advisory would work with the existing management team to get the UK business into a position to re-open and trade from as many stores as possible when restrictions are lifted by the government.

Chief Executive Stefaan Vansteenkiste said that he anticipated the firm’s owners and lenders would make additional funding available to fund the administration period.

However, the group’s business in Ireland looks doomed.

Debenhams said that it expected administrators to appoint a liquidator to the 11-store Irish operation, which employs 2,000.

The moves makes Debenhams the first major retail casualty of the health crisis in Ireland, where the government, as in the UK, has closed all non-essential shops.

Ireland on Monday reported a trebling of its unemployment rate to 16.5 percent with a further surge expected later in the month.

“We are desperately sorry not to be able to keep the Irish business operating but are faced with no alternative option in the current environment,” said Vansteenkiste.