Hi, this is Lex and welcome to the Fintech Blueprint. It's your podcast about fintech, decentralized finance, digital banking, investing, robo advice, artificial intelligence, and all the other frontier technology that is transforming financial services. To get more content like an illustrated transcript of this conversation in your inbox, subscribe at fintbloopprint.com. So without further delay, let's jump into today's episode. Hi everybody and welcome to today's conversation. It's going to be a fantastic one. We have with us today Ali Niknam who is the CEO and founder of bunq which is one of the largest neo banks in Europe and it's a fascinating story of incredible perseverance and scale. So with that, I'm excited to have Ali on the podcast.
Lex, thank you for having me. Glad to be here.
My pleasure. Let's just start with how large is bunq today and what does it do?
Before I tell you that, let's take a step back because bunq is now almost an oldie in the new fintech scene or era. We started back in 2012 at the height of the financial crisis with a bunch of people who felt like things should be better and banking should revolve more about users and about users' wants and needs. And so as a bunch of techies, we came together to try and improve this highly regulated and a bit antiquated sector. And the first thing we did was pursue a full banking license which was at the time deemed to be impossible. And so we do like a challenge. We came together, we did our homework, we actually read the law books and rule books and all the other books. And in doing so, we successfully attained a full banking license back in 2015 and became the first Greenfield company in the Netherlands to get a European banking license in over 35 years. And our vision has always been very simple, which is we put our users front and center in everything we do. We have a laser focus on our users. We try to make life easy for them. I appreciate with the existing notion of what a bank is, we may think banks are simple, but if you compare that to what we believe a bank could be, your financial buddy in our view, then we believe that the tools and the app and the service we provide significantly make life easy for our users. And I mention this because it is based on this very simple conviction that we have grown to where we are today.
I would love to get to the early days of how it was all coming together and what the landscape looked like and sort of what made you move forward with this, but let's just kind of anchor the scale of the bank today. I know that I think a few years ago it was 9 million users and I think it's gotten bigger since then. Assets I believe are over 5 billion, right? What's the footprint?
I believe the latest numbers we disclosed are a totality of 17 million users on our platform with over 8 billion in deposits and that makes us basically the second largest neo bank in Europe.
How many countries are you in?
All the European countries you can sign up for our services. We are in the process of getting licenses in both the UK as well as the US.
This is kind of a weird question. I'm interested in it since you said of it as being your financial buddy. From a brand perspective, what is the personality of bunq as compared to the others in the top five in the Europe neo banks market?
Well, actually that's a really good question, but I believe behind that question is another question which is who is our competition? For the insiders, for the fintech insiders, for the people who work in the fintech industry and have taken an interest in this sector, they may believe that our competition is Revolut or Monzo or N26 or whomever you'd like to compare us to. But actually what we see is that our real competition is with the incumbent banks whether it's ING in the Netherlands, BNP Paribas in France, Deutsche Bank in Germany, etc. I believe that because we have spent so much time in building a product people love to use and building a company that people entrust their money to, bunq is actually used as a primary bank and not just as a money service. You know, because we are used and seen as a full bank, people compare us to the other full banks. Of course,
as compared to the traditional banks, you have a personality rather than having no personality.
Yes, we have a face. We're friendly. We're transparent. We have all the values that one could consider as being modern. You know, you can reach us. We're normal human beings instead of being this faceless anonymous machinery that treats you like a cog in the wheel.
Let's then go to the beginning and forgive me for using the word neobank but in the time when you were starting the company it wasn't yet obvious to everybody. I think it was clear to a number of people that digital and mobile storefronts were the way to interact with financial services, but it wasn't obvious to everyone. And we had a couple of examples that led the way, you know, so Bank Simple in the late 2000s and kind of the beginnings of digital investing in the US and so on, but really just kind of the introduction of the idea. What was the landscape for digital banking when you had your founding moment and what were the seeds that led you to building the company?
Yeah, that's a great question because you see many of the companies you just mentioned that I also know they focus on building an app on top of existing infrastructure. So they were really good at creating an app but on the one hand they were held back because they had to still interface with outdated backends and on the other hand they didn't have full mobility of movement because they were dependent on the license of the bank to be able to offer whatever service they were envisioning. I think bunq was the first who said, you know what, we're not going to first do a version on top of another bank or get an e-money license or get a PSD license and then build it out. No, our vision is that we want to fundamentally change the financial sector. We want to make the financial sector into something that is more user-centric because it's easy to forget, but that wasn't the case back in 2010 and the years before. And so rather than first building a layer on top of something else, we're going to immediately apply for a banking license. This was incredibly hard because first of all, because there had been no greenfield permits for 35 years, nobody really knew how to assess a greenfield application. And by working together with the Dutch regulator, we came up with many of the concepts that are now common such as a sandbox environment for example. Then secondly, because you know we now have terms like fintech and neobank, but these didn't exist when we applied. So it was notoriously hard to explain what it was we were trying to do and why the regulator, who is inherently risk averse and conservative, would approve us. So many of the conversations were like okay so what's going to be the difference between you and ING and we would try to explain well, you know our culture is different, our focus point is different, the service is going to be different, and then they would say yeah but you just have an app and they have an app too. So you can imagine how difficult it has been to achieve that first milestone. But once we achieved it, I feel like the doors opened because very quickly we were able to launch and we launched with something that did turn out to be competitive with the big banks and so world changed.
Yeah, I'm sure the regulator was not there with open arms in the beginning of the 2010s at all. I like your point about not just trying to build something that rides on embedded finance, which at the time wasn't even really there, but that takes a certain amount of appetite for pain, you know, 'cause like everything you've described, put myself in the seat at that time. It's like all you've told me about is fixed cost and how long it's going to take you to launch, right? So like if you're not going to sit on top of another bank and god forbid you're trying to build your own core banking system, that's 25 million of cost. And if you are going to try to get a bank license, that's probably two and a half years of legal regulatory fighting, that's going to keep you out of the market. So, can you tell me about what gave you the perseverance and the conviction to kind of push through that, and maybe that's also a tie-in to you took this risk on your own using your own capital. Did that allow you to do things that other founders weren't able to do?
That's a really really great question and also thank you for acknowledging something that many many people overlook which is the incredible painful dread of getting this over the line because you are right, it was very difficult, and it wasn't you know some people see the excellent series Silicon Valley and they think you know you show up, you drink some beers, somebody punches a hole in the wall, everybody's laughing, you go home happy. That's not really how it works. At least not for us. But I think you know the people that joined bunq at start were all very idealistic and I believe that idealism still exists today. We truly felt that we were doing this for the greater good and we were touching many social aspects. For example, when we started because of the financial crisis, youth unemployment was very high in Europe. For example, in Italy, it was over 30%. So, one of the things we did at bunq is we purposefully hired younger people to get them off the streets because there's nothing worse than not being able to have a job in your formative years. I mean, this happened in the 1980s and people talked about the lost generation because if you don't learn how to show up on time and you know what discipline means and what responsibility means at a young enough age, it's difficult to learn this later on. Things like user centricity, actually caring about the people who use your services rather than just seeing them as a wallet that you're trying to grab as much money out of, that was new. I mean, if you spoke to some bankers back then, not all of them, but some bankers back then, you know, these were just commercial sharks trying to get as much money as they could. The image of the Wall Street banker, I guess, you know, that's a known image. And then to change all of that amidst of a crisis that led the regulators to be even more conservative was incredibly painful. And the one thing that drove us through it is this belief that no matter what, we were doing the right things for the right reasons. And that helped us to endure. And then as for your second question, the reason why we didn't take any funding is because we were playing the long game. I don't know what your experiences with VCs and PEs are, but we were convinced that if we would go the PE or the VC route, we would have been forced to develop a product, launch within a year, get some users, then go for a bigger license or a more elaborate license and iteratively do things. But that didn't match with the ambition we had and the ideology we had. And so for us, there really was no other route than to self-fund it so that there was no shareholder pressure or less shareholder pressure to become profitable within X time so you can do an exit within Y time and you know etc etc.
The time horizon of investors is very often not the structure that gets you there. Yeah, especially when you're doing the most difficult things unless you do have really particular partners. What was it like once you got your first product formulation in market? Like what was the very first product that you were able to ship and then how big was the team when that product shipped and how did you get your first customers to use it?
Okay, so this is a while back and I'm trying to be as accurate as I can, but take it with a grain of salt because it's almost 10 years ago or actually it is 10 years ago. I believe when we launched we were about 45 people and we launched with a simple service on the front end side that allowed you to do basic banking, payments, online payments, peer-to-peer payments. But already that first version had a lot of things that are now more common but that were innovative for the time such as payment requests, being able to get money back directly to your bank account from someone else's bank account, or having invites to your bank account so you could have like a shared pot with whatever number of people you wanted to have. So those things were very very new and of course purely the fact that you could sign up online was new at the time. We didn't have many of the tools that we have today. There was no Face ID, so we had to come up with our own biometric identification stuff like that. Those things were very innovative at the time. As to getting our first customers, because it was such a newsworthy moment that we indeed got our banking permits at least in the Netherlands, it was all over the news and because it hadn't happened, people were just curious and we got that first initial push.
And how big did that get you?
I don't remember. I don't know. It was big enough to get started. All we were worried about at the time was because all of this innovation you see in the front end was preceded by a lot of innovation in the back end. We built our own core banking platform that could do things and can do things that no other core banking platform can. And so obviously we had tested it and it worked, but you know getting launched and then getting I think we had 5,000 users in the first day or something which is a big number when you just start and you're dealing with other people's money, so you want to make sure that everything goes well, and it all went very fast from there.
Around the same time in the US you had robo advisor as a category emerging, also the words weren't there but that was going on and Betterment which now I think is 60 billion or something like that in assets, that launched at TechCrunch Disrupt. Their killer feature, I will forever remember this, their killer feature was the fact that you could move money into their account. Like that was it, you know? It wasn't like you could really invest into a thing because going from cash into an ETF would be difficult, at least as I remember it. But it was their TechCrunch Disrupt demo was somebody in real time opening and funding the account. And they also made the choice kind of like you where half the companies had built on top of other custodians and brokers which is the equivalent of sitting on top of a depository institution, and they had built their own broker dealer and vertically integrated and so they were able to get this performance boost which creates a customer experience that's very difficult to replicate if you're sitting on third party infrastructure. And as we've seen with the collapse of Synapse which tried to be the middleware between banks and fintech sort of customer footprints, if you're doing spaghetti code it's going to be spaghetti code, so it's a huge investment but it definitely pays off.
I fully agree, we fully agree on that point. I think but it's a pain to get there.
