Well played bunq. It has posted a pre-tax profit of €53.1m in 2023, its first full year of profitability. Profitable European-based neobanks remain a novelty. Starling was the first to report an annual profit but a full year of profitability still awaits Monzo.

As for Revolut, it continues to fail the basic challenge of posting its annual results on time. But according to Revolut’s latest-again late-results, it posted a pre-tax loss of £25.4m for calendar year 2022.

So, the latest earnings from bunq do merit a hearty well done.

From my perspective, bunq has always been one of the more likeable of the new digital challengers. I wish it nothing but continued success. There is however a but coming.
bunq has now submitted its application for an e-money Institution (EMI) licence in the UK. This will allow bunq to tap into a large market that includes an estimated 2.8 million British digital nomads. Fully licenced in all of the EU and awaiting a banking permit in the US, bunq continues to serve its UK users acquired before Brexit under relevant regimes.

It’s now poised to re-plant its flag and once again let its UK users open a local payment account in just 5 minutes.
I have to assume it knows what it is doing and has done its homework. It could have chosen easier markets. Indeed, history suggests it will have a challenge. The UK current account and savings sectors is tricky.

ING Direct, telcos and supermarket fails

Way back, over a decade ago, quarter-after-quarter, I reported on ING Direct’s international success. That is, with the exception of the UK, a market it utterly failed to master. Every quarter, I seemed to be reporting on the growing success of ING Direct in Europe or the US or Canada. By contrast, in the UK, it set up shop in 2003. In the 10-year period until it threw in the towel and exited, it reported a modest profit in only 2003 and 2006. Its ill-fated UK adventure resulted in accumulated UK losses of some €320m.

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Then there is the case of the mobile telcos. 02, in particular, made some ridiculously ambitious claims about what it would do in financial services. It ran with a prepaid card product but not for long. More recently, there is the example of the supermarkets.
Marks and Spencer, Tesco and Sainsbury have all embarrassed themselves at times with their inability to run profitable financial services product lines. The Tesco and M&S current accounts have come and gone.

N26, Fidor enter and exit UK market after failing

A closer example to bunq would be the ill-advised UK launches of Fidor and N26.
N26 exited the UK in 2020, having made no impression. Fidor made even more ridiculous claims than O2. Somehow, I managed to sit on stage and keep a straight face when conference-chairing, as the then head of Fidor told a large audience of UK bankers that Fidor would launch in the UK to show incumbent banks how to do modern banking. Fidor duly exited the UK after less than four, loss-making years.
It would be a shame if bunq suffered a similar fate.

For all Monzo and Starling’s success in growing customer numbers, winning market share and primary accounts remains a challenge.

GlobalData banking analyst Pooja Joshi notes: “Monzo boasts 7.4 million UK customers as of June 2023 but as per GlobalData’s Global Retail Banking Analytics, Monzo it for less than 0.5% of the UK credit card, personal loan, and retail deposits markets, making it a marginal player and it reported a loss of £116m for the year ending February 2023.”

A glance at the latest quarterly switch statistics released last week, highlight the difficulty for Monzo and Starling in signing up primary current accounts. For the latest quarter, Monzo and Starling actually suffered a net loss of switchers of 3,197 and 1,999 respectively.

As for international banks targeting the UK retail banking sector, Santander will be hailed as a success. By contrast, Sabadell bought TSB back in 2015 for £1.7bn and has spent much of the time since in business turnaround mode.

I hope that bunq is right and my doubts are misplaced-but the UK retail banking sector is not an easy market.