When Two Tribes Go to War | TWIF UK & Europe

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There was a LOT of excitement this week. The UK's most successful neobank is considering an exit. The UK's most successful football team of the last 15 years is also contemplating an exit of their own...

The UK Prime Minister refused to support a third runway at London Heathrow, the UK's busiest airport. OpenAI's "ChatGPT" faced accusations of interference by governments, with both the US and Australian governments expressing concern about the technology.

We saw Chinese President Xi Jinping visit the White House and announce that China would invite 100,000 young Americans for exchange and study programs over the next five years.

We saw the one and only Bill Gurley deliver yet another incredible presentation, this time on “Searchers and Blockers” and getting to the bottom of the cause of Covid, at the All-In Summit.

We saw Energy Jesus, Casey Handmer, continue his bid to turn water into wine sunlight and air into natural gas by announcing the supply of a “chemically pure grade methane.” This is effectively turning a non-renewable resource into a renewable resource and, in addition, a carbon-positive energy source into a carbon-neutral energy source.

The AI arms race continues unabated with the “labs” continuing to deliver breakthrough after breakthrough. Both have released models at 50% less cost per token and again both are intimating their IPOs may get pushed out to perhaps 2027. Anthropic is a particularly interesting one, with the leadership humblebragging about AI having a greater than 10% chance of wiping out humanity, then proclaiming that the frontier labs need to slow down, only to follow it up with another release of a frontier model. And just to round out the irony, Anthropic announces its very own Wet Lab. Yes, the very same type of lab as in Wuhan that denies any responsibility for the Covid lab leak. Here is a classic case of do as I say, not as I do!

I feel like I'm barely scratching the surface of the news coming out each week, and the pace seems to be accelerating. As a founder in my early 40s, I like to think I'm fairly tech-forward, but the cool kids are starting to make me feel old. Just yesterday, a YC founder told me, "Fiat is old school; we only use stablecoins now." I had a senior exec at a globally recognised brand who has hated on stablecoins for years slide into my DMs and effectively say “humour me – what if we did want to explore stablecoins as a business continuity objective?” What kind of world are we entering into where stablecoins, the immature, low-volume crypto hack, are now becoming the de facto rail? And not only that, it’s becoming the continuity play in the whitepapers of tomorrow’s global executive cohort.

But that’s not what I want to talk about today!

What happes when two tribes go to war…

For me though—the most exciting news of the week was of Nubank’s rumoured acquisition of the UK’s pre-eminent challenger bank, Monzo. But I don’t talk of this through the lens of a win for the UK’s tech scene. Nor do I want to talk about it through the doomer lens of the UK’s withering capital markets (although that and its consequence for the UK IPO market is a topic for another newsletter). I don’t want to talk about Nubank’s scaling or Monzo’s ultimate near-miss of being THE UK bank.

No, what I want to talk about is the seeming battle of the neobanks. A cold war that until only recently, I didn’t realise existed. For the longest time us Eurocentrists watched excitedly as the likes of Revolut, Wise, Starling, N26, and Monzo all fought it out for supremacy. Perhaps even with a little of that oh so old world arrogance in that (lets face it) our Fintech was miles ahead of US financial services for the longest time (maybe not anymore).

Yeah, occasionally we’d hear about some ‘Nu…somethingorother’, whatever, it's LATAM – who cares!

Then we’d hear a little more and ‘Nu’..something or other continued to grow and the rebuttal shifted to the fact that, well, it's a high-risk market, why would anyone want to serve the cartels! Then as they grew and grew and grew some more, the rebuttal moved to... well, there’s no competition. Why wouldn't they sweep up?! And whilst I still think that's a legitimate point, you could also say that they can only play the hand they're dealt.

Between them they are absolute behemoths of the startup scene. Let's take a GPT at them.

Yes Yes Yes, I’m sure you agree—that’s all very interesting. But why do we care? Well, for me it's a little bit like watching two wonderkids in similar but slightly different disciplines dominate their domains. Revolut has outperformed all its peers in the Old World. Nubank simply had no peers in LATAM.

But whilst they have been watching each other from afar, they are now destined to clash. Like Messi and Ronaldo meeting for the first time in the Champions League.
We know they are both eyeing up the US market for launch, with proposed charters underway for a US launch. My money would be on Nubank in a straight fight as they have more cultural overlap owing to migrant corridors south to north in the region. But what's more interesting is that they are sending raiding parties into each other's home territories.

I announced here on TWIF that not only was Revolut putting egg on my face over my EU passporting theory, but now they had obtained a licence in one of Nubank’s core markets—Colombia.

And only two weeks later, Nubank punches back by moving to acquire Monzo. Then Revolut swipes back with an Argentina acquisition. Fun and fun. This is more than a shot across the bow. This is peeing on Revolut’s doorstep. And we saw how they are responding.

For me I think NuBankis a huge success story but ultimately untested. In LATAM they had the rule of the roost. While Revolut battled and continued to battle challengers from all angles, hyper funded with excellent products, NuBank seemingly only had to deal with the stagnant backwaters of traditional banks. Anyone who has tried to deal with a LATAM bank knows how simply cutting red tape is the equivalent of rocket fuel for growth.

NuBank also went with (IMO) the lowest hanging fruit of all financial products - Credit.

Credit is essentially free money. Your problem is never sales with this product. Its policing. And whilst they have policed their risk excellently, Revolut have had to actually deliver tangible experiential value to win customers. And not only that, they’ve had to do it in a market with huge competition.

For me there’s no question that Revolut has the upper hand here—but that doesn’t mean David can’t beat Goliath Nik.

I for one am super excited to see a battle of the Neobanks and how it plays out.

Popcorn please.

- Daniel

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