Deposits, transaction volumes & lending: How do these Challenger Banks differ ?

Updated: Sep 28

Revolut, Monzo, N26 and Starling Bank all have one thing in common; over the last 6 months, C-Innovation has created deep-dives on each of them. Okay, but what do they really have in common? In this blog, we discuss how similar (or different) each of these Neo-banks are by looking further than just their valuation or number of customers. We compare each bank’s deposits, number of transactions processed, and their lending services. Where information is not available (usually because recent financial statements are not yet published), we use a range of data to make informed estimates.



Revolut and Starling Bank are far ahead of Monzo and N26 when it comes to the total value of customer deposits.


Some important distinctions are made between each set of graphs. All deposit values are shown as the companies Financial Statements: For N26 values have been presented in British pounds to all comparison. Monzo and Starling Bank are also the only ones to have released their reports for the 2022 financial year, whereas the last available annual reports for Revolut and N26 date 2021 and 2020 respectively. Information on deposits is only available up to 2020 for N26, so we have done some estimations for the missing information.


Revolut and N26 serve a total of 36 countries, compared to Monzo and Starling’s grand total of… well, 3 (those part of the United Kingdom). We would assume that deposits are much lower for the banks serving the UK exclusively, as the customer base is smaller, however comparing deposits for 2020 we see that Revolut counted less than competitor Starling Bank, which sped up growth during the Covid pandemic servicing small and medium size businesses


In 2018 all digital banks were having very similar customer deposits, with N26 and Monzo holding just below £1 billion and a small customer base of no more than a million customers, while Revolut had 3 million users already. But just a year after, as Revolut started raising customer numbers very quickly it was also steadily increasing customer deposits above competitors. Revolut counted £2.3 billion, N26 £1.9 billion, while Starling Bank and Monzo styed in the bottom with £1 billion and £700 million in deposits respectively.


Then the pandemic came, pushing people into digital channels, making Challenger Bank deposits increase faster. Starling grew rapidly between 2019 and 2021. On average of more than 15,000 a month of new sign-ups. It reached 2.7 million customers based on the last annual report, adding 600k new accounts. This rise is attributed to increasing business accounts focus during the pandemic, the push on government-backed loan schemes, business referrals, and word-of-mouth recommendations.


As of 2022, Starling Bank’s total deposits (£9 billion) are more than double those of Monzo (£4.4 billion), which means a £3.8k average deposit per customer for Starling compared to just £851 for Monzo. Our estimations place Revolut just behind Starling in total deposits and N26 in third place with £6.34 billion. However N26 average customer deposits is higher as it reaches £1k, while Revolut with £450 average deposits per customer place itself in last place.




Looking at the YoY growth is evident the push that the pandemic brought to Starling deposits, which increased by 200% in 2020, making it the only digital bank of our sample to increase the rate of deposits growth, all other banks growth slower than the previous year. Then, the rate of growth kept decreasing to all banks, except for Monzo in 2021, which managed to significantly increase balances held as customers deposits, growing at a 140% rate, reaching a total of £3,1bn, which meant an increase of £1,7bn.


Revolut already stands out from the crowd as a ‘super-app’. However, its Compound Annual Growth Rate (CAGR) of 75% per annum between 2019 and 2022 (value estimated for 2021 and 2022) makes it the slowest growing Neo-bank of the group after N26 (values also estimated for 2021 and 2022), which have recently found many challenges to growth. In Oct 2021, German regulator imposes limit on number of new customers N26 can sign each month (between 50,000 and 70,000 from an average of 170.000), then in March 2022, The Bank of Italy temporarily prevented N26 from offering new products or services to existing customers or from onboarding any new customers, as it has to improve and ensure it has the right anti-money laundering controls in place.



In 2020, Revolut experienced a 96% increase in customer deposits up from 2019, whilst Starling experienced a 200% increase. In this same year, Revolut received its banking licence for Poland and Lithuania. It is possible that growth in deposits will shoot up between 2020 and 2021 onwards thanks to the licence and a diversification of services to customers. We estimated this increase using average customer deposits +15% increase from the previous available year (2020) and multiplied by the effective number of customers reported by the company for years 2021 and 2022. We used this approach as the Revolut 2021 annual report has not been made available yet.


Neo-banks experienced an unusually high increase in transaction volume over the course of 2021


Revolut doesn't make their transaction volume public knowledge, however we do know they process over 250 million transactions a month. In order to estimate these volumes for Revolut, we have used average monthly transaction volumes of £5.5Bn during 2019 and multiplied this value by the effective number of customers reported by the company for years 2021 (15m) and 2022 (20m), considering also an increase as Revolut Business is growing and hits £100B in total transactions since 2017.


In the case of N26 we have taken the values announced in their financial statements in 2020 and also an extra announcement made by the company, which declared to have processed over €90 billion (£77.6bn) in transaction volume for the year end in 2021.



It makes sense that transaction volume for Revolut and N26 be higher than that of their counterparts as their demographic reach is so much wider. However, it might be the case that transaction volumes for Revolut are much higher than the graph can reasonably predict.


N26 recently reported its findings of a study conducted in 2021 on how much customers were spending. N26 found that each of its 2.5 million customers in France performed an average 21 transactions per month, valued at €1,150. Which resonates with our findings, as on average, for N26, we found that annual transaction volume is €12,857 per customer, or €1,071 a month, which is a 28% increase from €10,000 (€833) for 2020.


These figures exemplify the uniqueness of a post-pandemic economy. Due to low interest rates, spending habits in N26’s biggest markets France, Germany and Italy increased by 10.16%, 6.88% and 10.77% from 2020, having all previously declined in 2018 and 2019. The situation is similar to that of Starling Bank, whereby performance metrics have been blown out of proportion through low interest rates, and generous government subsidies.


Starling Bank is the biggest lender of the 4 featured Neo-banks despite having the least customers.


We found that all digital banks in our sample have increased considerably their lending book compared to pre-covid levels. In total Revolut, Starling, Monzo and N26 have lent to businesses and customers a total of around £6Bn by 2022, a significant increase of 910%, compared to 2019, when all banks reached just £600 million in their lending balance sheets.


Contrary to what people might believe based on valuation, number of customers, or even deposit value for each Neo-bank, N26 and Starling Bank engage in far more lending (both retail and business) than their larger competitors. What’s more, the amount of loans provided by Starling Bank during the pandemic has been a hot topic for some time.



Starling Bank and N26 represent 90% of the total lending of the four digital banks, Monzo and Revolut hold a very small participation of 4.3% and 3.3% respectively, as they have come just relatively recently into consumer lending; differently Starling and N26 has a great portion of their book into business lending (municipal loans for N26) and also they have mortgages as part of their current proposition.


Starling Bank’s lending was fuelled by government subsidies and has since been among lenders which have shared £352 million of taxpayer funds to cover losses from borrowers who couldn’t pay their loans back. The government scheme allowed businesses to borrow up to £50,000 without any risk to banks as defaults would be covered by the state’s guarantee.



Monzo did not benefit from the Recovery Loan Scheme, its total loans for FY2022 were worth almost 6.5 times less than those issued by Starling Bank. Having lent more than £3 billion over the Covid-19 pandemic, it is suspected that Starling Bank’s first year of annual profit could simply be a result of the massive lending which will decrease significantly since the scheme recently expired in June 2022. Loans which have been identified as fraudulent since the scheme ended will not be covered, which exposes Starling Bank to increased risk given that 40% of its lending book are bounce bank loans.


N26, loans and advances to customers amounted to EUR 1,274 million in 2020 (£1,098m). For the liquidity not required in the customer business, N26 investment strategy is low in risk. Apart from investing customers' money at short notice with the Deutsche Bundesbank and other European banks in the eurozone, it refinance public-law customers mainly in Germany (cities and municipalities). The N26 loan book is broken down into EUR 776.6m in municipal loans, EUR 319.2m in mortgages and EUR 177,6m on overdraft facilities and instalment loans used by customers. For 2021 and 2022 we estimated those values, using average customer loan value from the previous available year (2020) and multiplied by the effective number of customers reported by N26 in 2021 and 2022. Values for N26 are presented in GBP for comparison purposes in the graph.


In the case of Revolut, it launched consumer lending services, in July 2020, comprising unsecured loans and credit cards, to customers in Lithuania through its Lithuanian incorporated banking subsidiary, Revolut Bank UAB. These services were extended to Polish customers towards the end of the year. This explains the low lending volume compared to competitors.


Buy Now, Pay Later (BNPL) services also contribute to the stark difference in the amount of lending between banks. Revolut only launched BNPL this June in Ireland to just under 2 million trial customers, as it tentatively tests whether it will be worth the effort to go up against the likes of Klarna, Zip, and even Apple. If successful, customers in Poland and Romania will be next served.


N26 is dabbling in BNPL services since July 2021 through its launch of ‘N26 Installments’, whereby customers first make a purchase then can pay it back gradually. The instalments system reduces default risk on repayments as N26 verifies a customer’s ability to pay before offering the service.


In September last year, Monzo gave customers a new way to pay for things easily over time using Monzo Flex. By the end of FY2022, over 35,000 customers were using Flex and 300,000+ others were on our waitlist. Monzo customers have borrowed £259m in 2022, up from £105m in FY2021 following a loan decrease of £39 million during the pandemic.


The more controversial, the more money? Unlike N26, Monzo offers full BNPL service whereby a customer can purchase an item at Point-of-Sale by paying just a fraction of the price. ‘Monzo Flex’ offers credit limits of up to £3,000. Although Monzo has a team of financial specialists to help customers repay their debts, and claim not to sell debt to collectors, this is still a possibility. As a regulated bank, Monzo also reports credit scores to registered credit agencies. This ability to hold users accountable for this debt, as well as sell it if losses become too much to absorb, gives Monzo the confidence to offer credit with minimal checks (hence some controversy).


Our Key Takeaways


As investors are looking beyond valuations and revenue to determine the sustainability of a Neo-bank, comparing alternative financial metrics like Deposits, Transaction Volume and Loans gives a more detailed view of each company’s strengths and weaknesses. Due to some gaps in the information available online, many of the conclusions made in this article are based on estimates and have the purpose of providing an idea of what could or would have been if it weren’t for the Covid-19 pandemic.


Most notably, this study identifies that with rising interest rates global spending habits will see a sharp decline, which is likely to decrease the growth in transaction volumes for all banks. Similarly, higher rates are making it harder for businesses to repay loans to banks like Starling Bank, and as of July this year, 130,000 firms in the UK have already defaulted. Starling Bank’s ambitions of holding 18% of the SME market in 2026, up from 8% in 2021, might be just that… a little too ambitious.




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