Swiss fintech Neon has entered into a strategic cooperation with payment giant Transferwise. The step shows how tough the digital banking business has become in Switzerland.
The deal between Neon, the Zurich-based digital bank, its open-banking partner Hypothekarbank Lenzburg and British fintech Transferwise is designed to enable clients of the Swiss firms to transfer money both faster and cheaper to recipients abroad.
Clients of Neon will be able to send money directly through the app to more than 40 countries in 20 currencies, according to a statement on Tuesday. The move becomes possible with the integration of Transferwise services into the Neon application.
30,000 Clients and Progress
The cooperation agreement is Neon's fourth milestone this year already. In January, the digital bank had done away with exchange-rate add-ons and further fees on foreign payments. In June, it enabled the digital account onboarding 24/7. And, last week, the company celebrated the onboarding of client No. 30,000.
Now, the deal with Transferwise allows Neon to further increase the pressure on its rivals. In May, it had become apparent that the fintech unicorn Transferwise was looking for cooperation agreements in Switzerland, having founded a branch in the country.
More and More Players
But the market isn't just getting crowded because foreign players are looking for partners. In a few weeks' time, yet another local digital bank will launch its business – Yapeal. Two other are already competing with Neon for the Swiss clients, Zak, the mobile-banking solution of Bank Cler, and German fintech unicorn N26.
The question is whether the relatively limited market of Switzerland really is big enough for so many neobanks. But competition is surely helping the technological progress – the decline of the technological advantage Revolut once had over its rivals is just one, but important indication of this.
Learning From the Early Mover
But the technological advantage of Revolut isn't the only thing that seems to be evaporating – the company is also risking its client base with measures that are difficult to understand from the outset. Two weeks ago, the digital bank performed a change of paradigm, introducing a set of fees for its free account offering. And a few days later, the company increased the fees it charges from premium clients, which again caused anger among customers.
The steps that Revolut had to take suggest that other neobanks should think hard before growing their business at all cost and instead devote some energy into considering how they will earn money once the clients have been won over.
