The new face of digital banking: profit meets innovation
Andile Masuku
The fintech narrative is shifting. As I listened to co-founder and CEO Nik Storonsky of Revolut - Europe’s largest digital bank - on Harry Stebbings' 20VC podcast recently, what struck me wasn't just the impressive numbers—$545 million (R5.7 billion) in profit for 2023, driven by a 95% revenue surge to $2.2bn and an influx of over 10 million new customers in 2024 alone to a total of 50 million global customers—but rather the underlying philosophy that's reshaping digital banking globally.
Local reality, global ambition
This evolution mirrors conversations I've had with fintech founders across Africa, not least my recent African Tech Roundup podcast chat with Nigeria’s Carbon co-founder and CEO Chijioke Dozie, who offered a fascinating distinction between neobanks and digital banks.
In his view, the latter represents neobanks that have "grown up" by securing full banking licences. It's a maturation story that's playing out differently across markets, challenging the notion that digital banking success can simply be copied and pasted across borders.
Consider the British Monzo's humbling previous attempt to crack the US after deeming America low-hanging fruit - or, as Dozie pointed out to me, the impossibility of replicating Tyme Bank's South African playbook in Nigeria. "You couldn't have those formal distribution arrangements," he explained, noting the stark contrast in formal retail infrastructure between the markets. It's a reminder that while digital transformation is global, its implementation remains stubbornly local.
Unlikely Russian role model
What's particularly intriguing is how T-Bank (formerly Tinkoff Bank) has emerged as an unlikely north star for many digital banking entrepreneurs.
Both Storonsky and Dozie separately cited the Russian neobank as an inspiration, suggesting its influence extends far beyond its home market. This admiration seems rooted in T-Bank's ability to balance innovation with commercial fundamentals—a balance that's becoming increasingly crucial as the venture capital landscape evolves.
Return to fundamentals
Speaking of evolution, we're witnessing a fascinating return to fundamentals. Revolut's profitable surge, Tyme Bank's milestone achievement of profitability in December 2023, and Carbon's sustainable approach (achieving profitability in 2018 and 2019 on just $12m in equity) suggest a new paradigm. These successes raise pointed questions about the sustainability of the hyper-growth, cash-burning model that's dominated fintech narratives.
Nigeria's banking evolution
This brings us to Moniepoint's ambitious reported aspiration toward becoming a full-fledged commercial bank in Nigeria. Their recent $110m raise and strategic hire of former Stanbic IBTC chief financial officer Bayo Olujobi signals serious intent. But as they navigate this transition, they'll need to balance the innovation imperative with commercial reality—a challenge that's particularly acute in Nigeria's price-sensitive market.
Carbon's strategic pivot away from digital-only services to include offline touchpoints reflects this reality check. As Dozie shared with me, they're charting their own course while others adhere to popular conventions—specifically, charging for value while competitors burn cash on free services. It's a bold stance in a market where consumers have been conditioned to expect digital financial services for free or next to nothing.
The future of fintech investment
Perhaps the most forward-looking development in the digital banking founder sphere is Storonsky's Quantum Light venture fund. His data-driven VC strategy—employing data scientists and engineers to take a "scientific approach" to investment decisions—at least rhetorically, offers a compelling blueprint for future fintech founders-turned-investors.
As Africa's data deserts gradually green up, could we see the continent's successful digital banking founders follow suit, becoming the next generation of VC barons?
Meanwhile, the democratisation of banking, driven by internet and mobile adoption, has undoubtedly created unprecedented opportunities. But as legacy institutions' grip on traditional banking models loosens, we're learning that true democratisation requires more than just technology—it demands a sustainable business model that can survive evermore brutal market cycles.
For aspiring neobanks, the path forward seems increasingly clear: innovation must be balanced with commercial fundamentals. The era of growth at all costs appears to be giving way to a more nuanced approach, one that recognises the importance of profitability alongside scale. In markets like Nigeria, where Moniepoint appears to be on track to becoming a commercial bank, this balance will be crucial.
The next chapter in digital banking might well be written by those who can successfully navigate the tension between maintaining their innovative edge and building sustainable, profitable businesses. As the industry matures, perhaps that's exactly as it should be.
Andile Masuku is Co-founder and Executive Producer at African Tech Roundup. Connect and engage with Andile on X (@MasukuAndile) and via LinkedIn.
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