Fintellect’s Post

A recent study from Cornerstone Advisors reveals a concerning trend for credit unions in the checking account market. Digital banks and fintechs are swiftly claiming dominance, capturing a staggering 47% of all new checking accounts opened in 2023. Key Concerns: 1️⃣ Loss of Market Share: Credit unions face the risk of declining market share as digital banks and fintechs continue to grow at the expense of traditional institutions. 2️⃣ Generational Shift: With 72% of new checking account holders being Gen Zers or Millennials, credit unions must adapt to the preferences of these younger consumers who are increasingly turning to digital solutions. 3️⃣ Innovative Product Offerings: The success of Chime, PayPal, and others lies in offering unique products that go beyond traditional checking accounts. Credit unions need to explore innovative features and functionalities to stay competitive. https://lnkd.in/gk7-EDRG

The banker has no clothes - No longer a one way bet on rising rates!? Major new Substack piece - Part 1 Retail and transaction banking - There is a lot of attention on the increased net interest income earned by leading retail banking networks but transaction banking has seen huge tailwinds from higher interest rates. What happens when interest rates go down? The 5 UK Neobanks/money transfer firms - Revolut, Wise, Monzo, Starling, and OakNorth - generated over £2bn in net interest income last year with more than half of that being added in just one year. The UK domestic banks have been leveraged plays on rising interest rates. BNP Paribas’ acquisition of AXA’s asset management business ticks all the boxes of diversification. Is it time for UK banks to do a deal? If you haven't subscribed to my new Substack the link is below in the comments section with lots of data in this piece.

Huge News coming out yesterday morning which I'm sure everybody has already seen! Revolut is now authorised with restrictions as a UK Bank 🚀 It really is an incredible time to be working at Revolut, since I joined over 17 months ago the growth of the company has been nothing short of incredible. The product evolution is a testament to the fantastic team working behind the scenes. The UK banking license really is the cherry on the cake 💪 . At Revolut, we serve 45 million customers worldwide, with 9+ million of our customers in the UK. As we strive to deliver faster, better, smarter products and services, we’re pleased to announce that today we’ve been authorised with restrictions as a UK Bank. This is an important step towards launching our bank to customers in the UK. ➕ What’s next for Revolut in the UK? We’ve now entered a “mobilisation” period, a common regulatory stage for many new banks. During this period, we’ll complete the setup of our banking processes before starting to operate as a bank in the UK. ➕ What does this mean for our UK customers? Until we complete our work building the best possible banking experience for our customers, we will continue operating as usual. Our current customers will be able to keep using their existing Revolut account as always, with no changes to any of our products. New customers can continue opening e-money accounts with us, as well. And of course, customers’ money will continue to be safeguarded in the same way they always have been with us. Stay tuned — as soon as our setup is complete and we’re ready to launch our UK bank, we’ll make sure to reach out to customers. We’ll then explain what the next steps in the process will be for existing Revolut accounts to become UK bank accounts. For more information and FAQs, please see our blog: https://lnkd.in/dM3KXqV6 We look forward to this next stage of our journey and would like to say a big thank you to all of our customers who continue to support Revolut. #financialservices #fintech #ukbank

The future of banking is now

Prices will never be this cheap again! Your early bird savings to #MLSummit24 expire today. >https://bit.ly/46xx3Rb Don’t miss the latest perspectives from our 150+ speakers, including the CEOs of Lloyds Banking Group, Metro Bank (UK), Revolut UK, Standard Chartered Bank, Cynergy Bank and Atom bank to name but a few. Get actionable insights on the themes that matter NOW – open finance, lending and the economic landscape, payments innovation, customer experience and digital IDs. Have game-changing conversations with potential partners from among 1000+ attendees, 60% at head of level and above. Connect with people that matter – don’t miss out on 1-2-1 meetings with senior leaders, or the chance to continue conversations at our After Party! Message Toby Slack / Fergus Lee for the attendee list and book today >https://bit.ly/46xx3Rb #MLSummit24 #payments #banking #finance #financialservices #economy #ecommerce #POS #innovation #lending #openfinance #greentransition #customerexperience #CX #platformeconomy #digitalcurrencies #CBDC

Fintech leaders thinking about buying a bank often have sticker shock. They’ve heard Varo reportedly spent $100 million becoming a bank. They ask me whether it would really cost THAT MUCH to acquire a bank? In answering, I explain that it’s important to distinguish the costs of applying for a bank from those involved in acquiring and being a bank. APPLYING FOR A BANK typically involves $2-4 million in consulting and legal fees. I sometimes meet potential clients who balk at those costs. I tell them if they can’t afford those, they can’t afford the much higher costs of acquiring and being a bank. ACQUIRING A BANK means paying for investment banking services, additional legal services, and the bank itself. A community bank - the preferred fintech acquisition target - typically trades at 1-1.5 x book value. BEING A BANK means holding enough capital to satisfy tiered regulatory capital requirements, which are specified as ratios of capital to total assets (leverage) and risk-weighted assets (risk-based): 🔹 Base minimum ratios are legally prescribed floors for all banks. 🔹 “Well capitalized” ratios are floors below which banks are subject to restrictions on their activities. 🔹 Base + Capital Conservation Buffer (CCB) ratios are floors below which banks are restricted in making capital distributions and paying bonuses. See the table below. Also keep in mind that regulators can - and for new or recently-acquired banks often do - require additional capital or impose activity restrictions. So yes, entering banking is expensive. If you acquire a $1 billion bank, you are almost certainly looking at a $100 million+ outlay. #fintech #bankregulation #innovation

#FinTech | $MA Mastercard Q1 FY24: • Revenue +10% Y/Y to $6.3B ($10M beat). • Operating margin 57% (+2pp Y/Y). • Non-GAAP EPS $3.31 ($0.07 beat). Fx neutral: • Revenue +11% Y/Y. • Gross dollar volume +10% Y/Y. • Cross-border volume +18% Y/Y. • Switched transactions +13% Y/Y.

Revolut will beat HSBC and Barclays and others like them. In 10 years they will eclipse them in most metrics. Why? it is still all about UX. They are way easier to bank with. I once got so mad at dealing with HSBC that they called branch security (they made me go to the branch!... imagine that!.. maybe thats why I was so mad!). I left (was thrown out of - I am sensing a theme here) of DBS Bank, and now my main bank is Wise. I think that the key thing stopping people from leaving their 'real bank' and joining a digital is trust. They are still afraid their money isn't safe. Revolut getting the banking licence goes towards that. Medium and small sized banks have a nice opportunity, but also face an uncertain future. My advice to them is: 1. Set up a startup outside of the bank (i.e. away from bank culture, risk, security, compliance etc). 2. Build a digital bank. New back end (steer clear of your existing IT systems). Good front end. The team should be lead by designers not tech people. 3. Attack the SME sector. Business banking. It is terrible everywhere. Way worse than person banking. Once you have all the transaction data, use AI to work out which businesses to lend to. Thats nice cheddar cheese. Not to mention you can just charge business banking fees. 4. When the digital bank is big enough, move all the legacy customers over and shut down the legacy bank (think how much you will save on all your IT vendor costs alone!)

So much happening this time of year...graduation, Father's Day, warmer weather...make sure you're taking advantage and enjoying every minute! Transforming a bank's merchant services solution will be here on Monday. Recharge, enjoy and celebrate! #recharge #merchantservices #payments #fintech

Dive into this week’s #WeekendReads for the latest payments news. 1. Frost Bank taps Finzly for FedNow and RTP instant payments https://lnkd.in/e8CHhrhW / Finextra 2. Citi Launches Real-Time Funding Solution To Keep Up With RTP Adoption https://lnkd.in/emdwfyZD Bank Automation News 3. Preparing for ISO 20022: What Banks Need to Know https://lnkd.in/eTyjdn5C / American Banker 4. Most US Consumers Would Pay a Fee to Get Instant Refunds and Rebates https://lnkd.in/gWkHZc8n / PYMNTS 5. Take Your Pix: Brazil’s Instant Payments Are Heading Abroad https://lnkd.in/euZvNgaM / PaymentsJournal