Ireland has been the fastest expanding market so far for the online bank and it aims to attract account switchers
Ali Niknam, the founder of Dutch-headquartered digital bank Bunq, looks surprisingly relaxed for someone who hopes to shake up the world of Irish banking.
The technology entrepreneur started Bunq in 2012 with big plans for disrupting the banking sector – despite having little banking experience at the time. But a decade on, 40-year-old serial entrepreneur Niknam is well used to making waves across the 30 banking markets it operates in and is now hoping he can do it all again in Ireland.
Niknam believes Bunq, which recently claimed it had become the second biggest neobank in the EU after acquiring Belgian fintech Tricount, is heading in the right direction.
According to Niknam, deposits at the digital bank, which also operates in countries including the Netherlands, Germany, France, Italy, Spain and Belgium, have hit €1.3bn. Its recently published annual results for 2021 also show Bunq had narrowed its losses to €13.4m during the calendar year, a 16pc improvement.
Niknam said he was very happy with the results.
“I think now it really shows the discipline we have had all these years to not get sucked into the capital raise game,” he said. “We have focused on creating a sustainable business.
"It has enabled us to do what we think is right given the circumstances rather than taking steps we wouldn’t want to take.”
Niknam is now preparing Bunq to attract its share of Irish consumers.
“I am genuinely super optimistic,” he says of the opportunity. “I think we will be able to do what we have done in a number of other markets, which is to really offer a service that nobody else has.”
About one million Ulster Bank and KBC current and deposit accounts will have to find a new home due to their exit from Ireland. Niknam has his eyes on this prize, hoping to pinch people heading for the incumbent banks and also those tempted by other digital banks' offerings.
“I love competition,” he says. “I think Revolut has a fantastic product, but it is slightly different and aiming for a different part of the market than we are.
“I am not too worried about Revolut or N26 because despite their claimed millions of users, in the grand scheme of things, 99pc of the users are still with the incumbent banks. So that is what I am mostly concerned about – the giant groups of people stuck to whatever incumbent bank.”
In May, Bunq launched Irish international bank account numbers (IBAN), establishing a local presence in the country that allows for easier and quicker direct debits and payments to and from Irish people and businesses.
It had operated here with a Dutch IBAN and has a banking licence from the Dutch Central Bank. It recently received authorisation from the Central Bank to operate here on a branch basis under European Economic Area passporting rules.
I notice that a lot of Irish users are international
The move made Bunq the first challenger bank with an Irish IBAN. It looks promising.
“Ireland has been the fastest growing market for Bunq up to date,” says Niknam. “Ever since the launch of Irish IBANs, we’ve seen rapid growth in active Irish users.”
Niknam wouldn’t be drawn on targets for the Irish market, saying his ambition for deposits was “non-quantified”. The bank earns income from monthly subscriptions for banking accounts, with its retail offering ranging from €2.99 a month for an account that allows instant payments to a €17.99 monthly charge for its so-called Easy Green account. In addition, it offers a free basic savings account.
With the Irish IBAN launch, Niknam hopes to get a sense of Bunq’s market in Ireland and how best to serve it in the future.
“We are always very mindful and careful when we enter new markets,” he says.
So far, Niknam has been pleasantly surprised by the enthusiasm for digital banking here, which he believes is better than in other markets. Bunq is also finding an audience among those who bank internationally.
“I notice that a lot of Irish users are international,” he says, adding people can open accounts with French, Spanish, German and Dutch IBANs, regardless of their geographical location. “So I think the Bunq ability to bank across multiple geographies easily is interesting for them.”
Niknam has been working on some issues since Bunq’s Irish IBAN launch, including one institution that does not support its IBAN. However, he is confident Bunq will resolve them.
“It is the reason why we are a little bit careful in the early days not to go too quickly,” he says. “Payments seem simple, but there are so many systems and things that need to be updated, and we just want to ensure we don’t disappoint our users.”
With the incumbent banks hiring hundreds of staff to deal with switchers from KBC and Ulster Bank, Niknam is not concerned about any resource deficit.
“We have always been used to high growth and have automated our way out of it to ensure a swift and smooth experience,” he says.
Entrepreneurship and technology comes naturally to Niknam.
Born in the Canadian city of Windsor, near Toronto, Niknam moved to Iran with his Iranian parents aged two. He moved again to Gouda in the Netherlands at the age of seven.
At age nine, Niknam started his love of tech when he got into coding. He started investing in the stock market at the age of just 12.
Come 16, he started his first business assembling computers and selling them online.
“I sometimes joke I could have been Michael Dell if I paid more attention,” Niknam says with a laugh.
He started his first successful business in 2003, TransIP, while in university. It became one of the largest domain names, hosting and Virtual Private Server providers in the Benelux region. TransIP recently merged with Belgian rival Combell under Team Blue, giving the business a $1bn (€980m) valuation.
Starting businesses is something Niknam enjoys. While writing a book about entrepreneurship, the idea for Bunq came about as the financial crisis of 2008 hit people hard.
“I thought, ok, let's start a new bank – a new way of doing things – laser-focused on users, different business models, applications, everything. Doing so would diversify the market, and everything would be different.”
Founded in 2012, Bunq was self-funded by Niknam until it completed a €193m Series A funding round that Pollen Street Capital led.
The deal valued the bank at $1.9bn last July. Niknam also put his money where his mouth was in the transaction. Having already poured €98.7m into Bunq, he invested a further €25m.
Part of the Series A raise led to Bunq acquiring Irish specialist SME lender Capitalflow, founded by Ronan Horgan in 2016. Pollen Street Capital was a major shareholder in the lender, with the deal valuing Capitalflow at €141m.
The deal has been mutually beneficial.
Bunq allows Capitalflow access to a greater pool of capital from the bank’s retail savings, enabling it to cut pricing and expand lending volumes. Capitalflow has hit the €500m mark in its loan book, with its growth up 39pc and sales up 56pc.
“They are performing really well,” he says of Capitalflow. “It was a win-win situation.”
With the transaction complete, Niknam pressed ahead and got Bunq its Irish IBANs.
We are so heavily regulated that it sometimes feels like we are redoing the communist experiment
The number of users in Ireland so far has “exceeded expectations”. Growing further is of genuine interest, despite the Irish banking sector's perceived challenges.
Niknam says he is aware of the Irish banking sector’s complicated history – he said it was something Bunq had to have “in order” before its Series A deal was approved by the Dutch regulator. However, he believes brighter times could be around the corner.
“I think the Irish market, from what I can see, is really healthy,” he says. “I think the Irish regulator has done a bang-up job of getting the sector in order.”
However, the regulation of banking in Europe has frustrated Niknam.
“I believe that in banking, we are so heavily regulated that it sometimes feels like we are redoing the communist experiment. Central-led organisations thinking, ‘thou shall and thou shall not’ and also thinking that will somehow address everyone’s concerns, wants and needs.
“I believe that we should empower consumers to decide what they want or not,” he adds, reiterating his belief Government should only ensure consumers are empowered and protected.
There are some issues Niknam would like to see addressed. He speaks about frustrations with IBAN discrimination across Europe. He also believes switching banks should be easier for consumers, drawing a comparison to the mobile phone industry.
“Look what it has resulted in there – prices down, services up.”
While Niknam says Bunq is not planning to enter the mortgage space, he shares that further Irish acquisition activity could be on the cards.
“We are definitely looking into it,” he says. “We are looking at adjacent sectors to Capitalflow to expand operations there.”
Regardless of the incumbent banks' advantages in resources and visibility, Niknam believes Bunq's success will come down to one thing – the product.
“We live and die by the conviction – build it, and they will come,” he says. “We really spend all of our time creating a product people love to use. That will be the basis of our success story.
“We do not have the resources to advertise as much as the incumbents do. We don’t have the branches or the visibility in the streets. What we do have is a terrific product, and we already have a number of enthusiastic users, and we want to expand on that.
“What does success look like?” he asks. “Success for us is the happiness of our users and having that product tailored to Irish needs. Once we have that, we are not entirely there yet, but we are 85pc there, then it grows, and the commercial success will come from that.”
Founder and chief executive of Bunq
Married to my job
I split my time between New York and Amsterdam
Coding is still my favourite, even after all these years.
Thus Spoke Zarathustra: A Book for All and None by Friedrich Nietzsche
What is the best piece of business advice you have received so far?
Some time ago I read the book Factfulness. Its author, a Swedish physician, demonstrates how many of our assumptions about the world are wrong. He applies an unbiased view to data, and then draws conclusions based on that. We apply the same approach at Bunq, to be able to truly understand our users and create a product they love to use.
What has your time with Bunq taught you about business?
How much of a difference there is between regulated and unregulated business. After experiencing both I believe creating an open marketplace where consumers are empowered to decide what’s right for them is best for everyone involved.