European neobanks Revolut and N26 are gearing up to enter the telecoms market, both companies announced earlier this week.
Over the past decade, Europe’s fast-growing neobanks largely acted as branchless payment platforms, but soon expanded into a range of services — from business banking to travel insurance, savings accounts and stock trading.
Now they’re looking to disrupt another industry: Europe’s €500bn telecommunications market.
Revolut is offering a full-service mobile offering with unlimited texts, calls and data, and 20GB EU and US data roaming offered at an introductory price of £12.50 in the UK. It’ll also launch in Germany, where Berlin-based N26 is also set to roll out telecoms services this month.
“It’s no surprise that neobanks are now exploring telco as a potential source of growth and revenue,” says Matt Halligan, chief technology officer of Optiva, a company helping businesses to launch mobile plans.
“As mobile-first, digital-native businesses, they already have the infrastructure, agility, and customer relationships to support a move into mobile services.”
Europe’s telecommunications industry
But it’s not going to be easy. Even with the billions in profits they’ve earned through their financial services offerings, Revolut and N26 will be small fish in a big pond.
In both Germany and the UK, the fintechs will go toe-to-toe against some of the continent’s largest companies, including Deutsche Telekom, Vodafone, BT Group and Telefonica.
Kester Mann, director of consumer and connectivity at research and advisory company CCS Insight, says it’s unlikely they will ever become major players in the market.
“Neobanks can gain a reasonable customer base in telecoms, but to make inroads into an established market of 90m+ connections, it’s going to take a very long time,” he says. “They will probably remain a smaller player for eternity.”
It’s expected both Revolut and N26 will enter the telecoms industry as mobile virtual network operators (MVNOs), third-party companies which can lease or buy access to calls, data and texts from established mobile network operators (MNOs) such as EE, 02 or Three.
This will mark a change of tack for Revolut. While it has since partnered with B2B fintech companies such as Upvest for its stocks and shares products, Revolut has almost always sought to develop new projects in-house.
And it remains unclear which network Revolut or N26 will partner with; fintechs that rely heavily on third-party systems risk losing agility and visibility, says Optiva’s Halligan.
“Beyond negotiating wholesale network access, neobanks need to own the end-to-end customer journey if they want to compete with more established operators,” says Optiva’s Halligan. “That means managing onboarding, service delivery, customer care, and ongoing product innovation in-house — all at the pace and scale that subscribers have come to expect.”
Mann agrees neobanks will be at the mercy of larger mobile network providers. “There’s always the option they might squeeze you in terms of pricing,” he says.
“It’s a quick route to market, but they obviously don’t hold all the cards — either in terms of the network rollout or the launch of new services.”
The competitive edge
Still, MVNOs have other advantages. Not having to cough up for the expensive licensing processes required to become a fully-fledged operator means neobanks can, in theory, offer more competitive rates.
Revolut, for instance, could run the service at a loss as long as it’s able to cross-sell its customers into its profitable financial services. Last week, Revolut celebrated its second consecutive year in the black, with pre-tax profits doubling to £1.1bn and revenue soaring from £1.8bn to £3.1bn.
The telecoms market is also heading towards a world where people are increasingly buying such services online, says CCS Insight’s Mann. That mirrors the consumer financial services world — so far this year, both Lloyds and Santander have announced plans to close hundreds of physical branches amid “a rapid movement of customers choosing to do their banking digitally”.
Revolut has shown some success in the telecoms market already with its eSim product, through which users can access local data networks while traveling abroad without swapping out their physical SIM cards. According to its latest annual results, 600k customers purchased an eSim plan with the fintech in 2024.
He says, “It feels like perhaps the stars are aligning to enable this kind of move.”
Read the orginal article: https://sifted.eu/articles/revolut-n26-telecoms/
