Digital Bank Insights Recap

Unveiling Key Trends and Transformations

September 2024
 Key 01
Global expansion continues to be a key growth
driver for digital banks.

Digital 02
Digital Banks Adjust to Declining Interest Rates.
After a period that fueled profitability, digital

Banking banks are now navigating a new environment.

Trends 03 Digital Banks Enter Wealth and Investment

Services. Many are diversifying beyond core
banking services.

September 2024
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04 Tech Companies Expand Financial Offerings
Major tech companies are increasingly entering
trends by subscribing to the financial services space.
C-Innovation.
Digital Banks Face New Regulatory Pressures As
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05 digital banks grow and expand into new markets,

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regulatory scrutiny and compliance challenges.
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06 Embedded finance is transforming industries
and opening new growth opportunities.
 ● Global expansion remains a crucial growth strategy for digital banks as they

01 pursue new markets and form strategic partnerships to scale operations. This
approach enables them to tap into emerging economies and increase their
global presence.
● JP Morgan Chase is set to launch a UK credit card via its digital bank, Chase,
with plans to challenge local competitors like Barclaycard. This is part of Chase’s

Global expansion broader strategy to become a significant player in Europe.

Revolut is making aggressive moves in the Middle East, securing investment
continues to be a key ●
from Mubadala and applying for licenses in the UAE. The bank aims to offer
growth driver for tailored services, such as remittances, to cater to the region’s expatriate
digital banks. population.
● Nubank is strengthening its collaboration with Nasdaq in Latin America,
particularly in Colombia, to improve regulatory reporting and streamline
operations. This partnership reinforces Nubank’s dominance in the region.
Europe UAE Saudi Colombia
Arabia
● Qonto has expanded its presence in Austria, Belgium, and the Netherlands,
doubling its reach in Europe. This expansion aligns with its strategy to achieve
profitability by 2025 and explore a potential IPO.
● Strategic partnerships continue to play a pivotal role, as seen with Adyen
integrating Klarna and Alipay+ into its global payment terminals, improving
merchants’ ability to serve both local and international customers.
Qonto's Client Base and International Reach: A Timeline of Growth
and Expansion.
Evolution of Qonto's Customer Base Qonto’s International Presence

New markets Customer’s acquisition 450.000

8% Market Share in France
With an estimated 300,000 users in France

Spain
Acquisition

Germany 300,000
€486 million (Series D)
Payment
+ $5Bn valuation
Used Treezor's Institutions
License Italy
API and
Electronic Core 120,000
Money Banking
Institution System
license 65,000
40,000
25,000
5,000
0
YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6

New image New Markets

(2024) Austria Belgium Netherlands

Source: Raising our ambitions . Qonto. Financing SMEs and Entrepreneurs 2020. Profile per country. OEDC. 2022.
Revolut Expands into the UAE and Eyes Saudi Arabian Market,
Following Barq's Explosive Global Growth.

Early-Stage User Growth Revolut VS Selected Players

Sept 13, 2024

4.7
- - - Projected growth by C-Innovation
4.5

3
2.5
Millions of users

2
1

1 1
0.3
0 0.1
YEAR 0 YEAR 1 YEAR 2 YEAR 3
Years of operation

5
C-INNOVATION Source: C-innovation data.
Note: The projection was based on Barq's initial user base, Saudi Arabia's 16 million active population, and growth comparisons with STCPay, Revolut, and NuBank.
The UAE shows a leading position in Digital Banking expansion, with
Saudi Arabia and Egypt also contributing significantly to the regional growth in the number of
institutions over time.

Trajectory of Digital Banking In The Middle East

50
43 42
45 UAE Saudi Arabia Egypt Israel Turkey Rest of ME Total
38 37
40
9
32
35 Selected Sample of Digital Brands by Launch Year
9
31
30 6 27
26 7
25 5 22
25 7
6
6 4
20 19 6 17
3 4 5
4 3
3 4 12
15 14 3 4 4
3 2
3 2 3
10 3 3 3 7
10 2 3
7 3
3
1
4 2 2 3 12
5 2 11 2
2 2 8 9 9
1 1 2 1 5
2 4
1 1 011 01 2
0 0 -3
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

C-INNOVATION Source: C-Innovation data. Company websites, and public sources

Note: Non exhaustive list
Note: Rest of ME (Bahrain, Kuwait, Jordan, Qatar, Iran and Iraq)
 Neobanks in Colombia Surge, Nequi Leads with Over 20 Million
Users as Revolut Prepares for 2025 Entry.
Top Digital Banks by Number of Users (Millions) in Colombia

1m 41.3m
1.
800K Total Digital Bank
Users in Colombia

20.1m
Set to challenge
established
players by 2025.
2. 18m

400K 3. 1.3m

Source : Number of users is based in the most upto date financial report by Digital Players as Q2 2024.
 ● After benefiting from a period of rising interest rates that boosted profitability,
digital banks are now adjusting to a phase of declining rates.
02 ● Over the past few years, rising interest rates significantly contributed to the
success of digital banks, enabling them to grow their deposit bases and
increase profitability.
● Chase saw its UK deposits rise from £15 billion to £20 billion during the higher
interest rate environment. With rates now easing, the bank will need to

Digital Banks innovate its product offerings to maintain customer interest and continue
growing deposit volumes.
Adjust to
● Zopa, which recently reported profitability, is now rethinking its savings
Declining products and loan offerings to stay competitive in this new lower interest
Interest Rates. rate landscape. The bank had grown its deposits by 30% year-on-year, but the
changing economic conditions call for careful adjustments.
● Digital banks which previously leveraged higher interest rates to attract more
deposits, are also adjusting their strategies. They are likely to focus more on
generating revenue through subscription services, investment platforms,
and premium banking features.
● As central banks continue to ease monetary policy, the new environment will
test their ability to deliver value to customers without relying on the interest
margins that previously drove growth.
 Digital Banks’ First Profitability Announcements vs.
How Interest Rate Interest Rate Hikes by the BOE and ECB.
5.25
Adjustments Have
5
Fueled Profitability ECB Interest Rate - Deposit facility BoE Interest Rate

for Europe's Digital 4

Banks: A Look at
Key Milestones. 3.5

0.75

0.1
Note: Non exhaustive list. Selected examples

-0.5

Profitability Yet to Be
Announced (as of 2024)
Chase Soars in the European Digital Banking Race, Leading with £20
Billion in Deposits for 2024.
Deposit volumes by Top European digital banks £20.0
(£Billions, Latest released figures)
£18.2

£ 7Bn £ 89Bn £15.0

Collective deposits Collective £13.4
holding back in 2018 deposits holding £13.3
£13.00
£10.6

≈20bn deposits added by top digital banks £9.0

£10.0
£11.2

in Europe in the last year. £9.2

£7.4
£6.8 £6.8*
£6.1
£5.9 £6.0
£4.6 £5.8 £6.2

£3.5 £4.4
£3.7
£2.4
£3.0 £3.1
£0.9 £1.9 £2.0
£1.0 £1.5
£0.9 £1.3 £0.9
£0.3 £0.8 £0.7
£0.3 £0.0
£0.7
2018 £0.3 2019 2020 2021 2022 2023 2024

* Estimated value for N26 for year 2023.

Source: Players financial reports from 2018 to 2024. 10

Note. Values for N26 for year 2023 has been estimated, using average customer deposits +10% increase from previos available year (2021 and 2022) and multiplied
by the effective number of customers reported by the company for years 2021 and 2022. For comparison consistency values has been converted into sterling using
an Exchange rate of 0.86 pounds per Euro.
 FOR UNDER 16

Product Stack – Monzo Expands Into Traditional Banking with (SOON)

PENSIONS
Pensions, Loans, Investments, and Possibly Mortgages Next. SOLE TRADER
LOANS

Offered via partnership TAP TO PAY (BUSINESS)

¨Monzo Own Product

INVESTMENTS

• Monzo's recent launches signal a strategic move to INTEREST SAVINGS

broaden its appeal to both individual savers and small

TARGETS SETTING
business owners.
MONZO FLEX FOR BNPL
• By partnering with industry leaders like BlackRock is
SAVINGS MARKETPLACE
leveraging established expertise to enhance its product
BUSINESS ACCOUNT
lineup, positioning itself for sustained growth and deeper MONZO PLUS & REMIUM PHONE & TRAVEL INSURANCE FROM AXA
market penetration in 2024. PERSONAL LOANS
REWARDS
SAVING POTS
FX TRANSFERS
JOINT & TEEN ACCOUNTS
APPLE PAY AVAILABLE
OVERDRAFTS
GOOGLE PLAY AVAILABLE
CURRENT ACCOUNT
MONZO APP
PREPAID CARD(MASTERCARD) PREPAID CARD DISCONTINUED IN THE UK (AVAILABLE IN THE USA)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Sources Product Updates, Monzo’s Website as August 2024 11

 ● As digital banks mature, many are diversifying beyond core banking services
into wealth management and investment platforms, aiming to attract more
affluent customers and build long-term revenue streams.
03 ● The emerging neo-banking ecosystem in the USA sees diverse FinTech players
converging into digital banking services.
● Monzo, Revolut, N26 and bunq are leading the charge in this area by
introducing wealth management services tailored for high-net-worth
individuals.
Digital Banks Enter ● Revolut has taken a significant step with its new standalone investment app,.
Wealth and This initiative positions Revolut to compete with traditional brokerage firms like

Investment Robinhood and Etoro.

Services. ● Bunq has also introduced new investment features, allowing users to invest in
stocks. Alongside this, bunq has launched premium banking products like its
stainless steel Metal Card to attract wealthier clients.
● Zopa, which recently crossed £5 billion in customer deposits, has achieved
profitability, largely due to its focus on competitive savings products and
personal loans.
● By diversifying into wealth management, these digital banks are positioning
themselves to reduce reliance on traditional interest-based income, instead
focusing on higher-margin financial services.
Digital Banks Pivot: How Monzo, Revolut, N26, and Bunq Are
Redefining the Wealth Management Landscape.
Pension Consolidation Invest Stocks and ETFs Trading

July 24, 2024

Stock Trading

C-INNOVATION September 24, 2024 September 24, 2024 September 3, 2024 (Spain)
The emerging neo-banking ecosystem in the USA sees diverse FinTech players
converging into digital banking services.

Digital Payment Platforms

Investment Platforms

Lending Solutions

Next-generation Banks

C-INNOVATION
14
 ● Major tech companies are leveraging their vast user bases and ecosystems
to offer innovative banking solutions.

04 ● Apple is ending its partnership with Goldman Sachs, indicating a shift in its
financial services strategy. This move suggests Apple may bring services in-
house or form a new partnership, with rumors pointing to JPMorgan as a
potential successor
● Mercado Pago, the FinTech arm of Mercado Libre, has grown into the core
driver of the company’s ecosystem. This highlights the role FinTech can play
Tech Companies in accelerating growth for e-commerce giants.
Expand Financial ● PayPal continues to expand its cryptocurrency offerings, including enabling
Offerings. U.S. merchants to buy, hold, and sell cryptocurrencies directly from their
PayPal accounts. This move broadens PayPal’s reach in the digital asset
space and aligns with the growing demand for crypto-based transactions.
● Amazon is integrating ay al’s payment services into its "Buy with Prime"
feature. This integration reflects Amazon’s strategy to embed more financial
services into its ecosystem.
● Google Wallet is taking its services to the next level by introducing digital
IDs, allowing U.S. travelers to use their smartphones for identification at TSA
checkpoints. This positions Google Wallet as more than just a payment
solution, evolving into a comprehensive platform for travel and identification.
 pple’s Financial roducts
Timeline of Apple's Financial Products and Key Features

2014 2015 2017 2019 2022 2023

Mobile Payments with Savings

Digital Wallet P2P Payments Credit Card BNPL Loans
Payments iPhone account

Tap to Pay Savings

Payments Versatile Network Effect Rewarding Payments Flexible Convenient

Convenient Integrated Convenient Integrated Fast Convenient Integrated

Secure Secure Secure Physical Easy Secure

Parental
Control*

Update July 2024

Update July 2024
Update July 2024 Apple’s partnership
Apple Pay Later is with Goldman
Apple’s partnership with Goldman no longer offering Sachs, pivotal to
Sachs, pivotal to the Apple Card new loans. the Apple Savings
Account, is ending. Account, is ending.
* via the Apple Card Family program.

C-INNOVATION
Source: Own elaboration with data extracted from "Apple’s Conquest in the financial sector. C-Innovation and Peak Financial. 2023" and Apple Newsroom.
 Mercado ago’s Journey: Expanding Financial Ecosystem
and Integrating Full Digital Banking Services (2017-2024).
Mercado Pago’s Evolution: From Digital Wallet to Comprehensive
Digital Banking.

Expansion into Financial Ecosystem Integration of more comprehensive

financial Services
• QR Code Payments • Interest-bearing digital • Buy Now, Pay Later (BNPL) • Digital Payroll and
• Money market fund accounts Services Salary Advances
• consumer and • Credit Card • Mercado Crédito
merchant credit lines, Expansion

2018 2020 2022 2024

2017 2019 2021 2023

• Digital Wallet is • Prepaid Card • Crypto Services • Credit card acceptance
launched and point-of-sale.
• Crypto Integration
Expansion

Source: Mercado Libre Inverstors Presentation. Q2 2024

PayPal Broadens Financial Ecosystem with a Robust, Enhanced Digital
Banking Suite and Services for Consumers and Merchants

C-INNOVATION
Source: PayPal Investors Presentation. 2023
Google Wallet is taking its services to the next
level by introducing digital IDs.
 ● As digital banks grow and expand into new markets, they are increasingly
facing heightened regulatory scrutiny and compliance challenges. These

05 pressures are reshaping risk management

partnerships, and even dictating expansion plans.
strategies, influencing

● Revolut is facing a surge in complaints about APP scams in the UK, driven by
new regulations requiring faster fraud reimbursements. Its latest report shows
62% of scams stem from Meta’s platforms, prompting Revolut to call on Meta to
share the reimbursement burden.
Digital Banks Face ● In Argentina, Mercado Libre has accused local banks of anti-competitive
New Regulatory behavior in QR payments, reflecting broader regulatory challenges as FinTechs
Pressures. push for fairer competition with traditional financial institutions.
● The increasing demand for comprehensive compliance solutions is
prompting FinTech companies to forge strategic partnerships. FinTechs are
aligning with regulatory bodies to mitigate risks and streamline compliance.
● In Kenya, partnerships like Safaricom and Mastercard are shaped by
regulatory demands to enhance payment systems and cross-border
remittances while ensuring compliance with local and global standards.
● In Thailand, Krungthai Bank has applied for a virtual banking license, reflecting
the country's regulatory push for financial inclusion, as digital banks align with
government initiatives to serve underserved populations.
Revolut Pressures Meta to Address Fraud Issues Amid Rising
Scam Reports.

Source: Revolut. 2024

 Mercado Pago's Growth Intensifies Competition in Argentina's
QR Payment Market Amid Regulatory Challenges.

Engagement with Mercado Pago is rising.

• 52M active users, up 37% YoY.

•Assets under management
surged 86% YoY to $6.6B.
• Cedit portfolio grew 51% YoY to
$4.9B, increasing competition in
financial services.

Source: Mercado Libre Inverstors Presentation. Q2 2024

 ● Embedded Finance is making financial services more accessible across
sectors. This trend is reshaping consumer interactions with financial

6
06 ●
services and opening new growth avenues across sectors.
Brex launched an embedded payments solution for B2B software vendors,
enabling businesses to offer seamless financial services without relying on
external institutions.
● Amazon integrates PayPal into its "Buy with Prime" service, enhancing
Embedded finance
payment flexibility as part of its broader strategy to embed financial
is transforming services in e-commerce, improving customer experience and boosting
industries opening conversions.
new growth ● Xero has partnered with Klarna to embed buy-now-pay-later (BNPL)
opportunities. options for small businesses, boosting cash flow and customer retention with
flexible payment solutions.
● Intergiro introduced a no-code platform allowing businesses to build
custom banking apps quickly, democratizing financial services by
embedding banking features without technical expertise.
● Embedded finance enables companies across industries to offer financial
products directly, reducing friction and making services more accessible to
consumers and businesses.
Brex and Xero Leverage Embedded Finance to Boost Business
Payments and Sales.
Brex Embedded

Brex Embedded offers B2B software vendors a By embedding Klarna’s BNPL

superior payments experience without the need services, Xero enhances its
for them to build their own infrastructure. value proposition, helping
small businesses improve
customer retention, close
larger sales, and compete
more effectively in the
evolving digital economy.
 Stay tuned for more!

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