Will your neobank become your mobile phone provider? (02/06)

Hello TWIF UK & Europe friends,

Welcome to the new readers who’ve joined us since last week.

While the past week was quiet on the fundraising front, there was plenty of other news. TrueLayer acquired Dutch BNPL startup in3 to offer Pay by Bank with credit at the checkout, and ClearBank launched Digital Asset Rails (their product name) to offer "programmable liquidity for cross-border flows" — a sign that crypto and traditional banking are coming together more and more.

However, one news item that doesn't look too glamorous on the surface but tells us a lot about the potential direction of neobanks is Monzo's announcement of its e-sim offering.

A mobile phone contract is one of the subscriptions it's almost impossible to live without in the 21st century — although the way we buy our mobile plans may be about to change.

Revolut's e-sim has been live for a few months, and Klarna's is coming later this year (Klarna isn't a bank in the UK yet, but is in the EU). Three neobanks offering the service points to a convergence in both perceived customer demand and the ability to deliver it through existing neobank interfaces.

Yet mobile networks have struggled to hold onto customer relationships over the years. As WhatsApp grew, SMS declined, and as data has gotten cheaper the ability for providers to make big margins on data plans has diminished greatly. 

A case in point: Revolut is selling its e-sim for £12.50 with unlimited UK calls and data, plus 20GB of roaming data. I can remember when a package like that would have cost closer to £50 — and even then there would have been limits. It was never really unlimited.

Also the number of touchpoints we have with our mobile providers has steadily declined. I only contact mine to upgrade my phone or change my plan every two or three years. Yet I interact with my neobanks (Monzo and Revolut) almost every day.

One specific angle Monzo is taking: offering is a 5% discount each year — rewarding customer loyalty. UK consumers have typically faced the opposite with an annual April price rise pegged to inflation — usually CPI, sometimes RPI — the norm. (The telecoms regular Ofcom banned inflation-linked, percentage-based rises in new contracts from January 2025. Now increases now have to be shown in pounds and pence upfront. In practice, providers can simply bake in fixed annual rises that recoup much the same amount.) Either way, an automatic yearly hike is out of step with other European markets, and knowing your price will fall rather than climb each year is a strong positive for consumers.

In the UK if you want the best deals mobile providers will lock you into a 12 or 24-month contract. But the neobank e-sim offerings are month-to-month with no lock-in. That's a big shift in business model — and with it will come changing consumer expectations.

For a neobank, becoming a mobile provider via e-sim is something it can offer at little to no margin. But why bother? Retention. Many consumers stay with their mobile provider for years out of contract lock-in or sheer inertia — moving is too much hassle. The bet is that neobanks, already offering cheap plans and enjoying high customer satisfaction, can use the e-sim to make customers that much more likely to stick with their bank too.

Please find another week of fintech news, financings, and exits below!

Thanks for reading,

- Matt

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Highlights below of deals since the last post in the fintech space across the UK & Europe. Deal data powered by Dealroom.

Fonoa raised a $110m Series C funding round led by Headline with participation from new investors Eurazeo and Forestay Capital, alongside existing investors Index Ventures, OMERS, Coatue, and Dawn Capital.

🇬🇧 Monzo opened its waitlist for its e-sim product, which will deliver monthly rolling plans and loyalty discounts 

🇪🇺 The ECB resisted proposals to relax rules for euro stablecoins

🇪🇺 ClearBank launched Digital Asset Rails to enhance cross-border settlement

🌍 Tether was commissioned by Georgia to build a lari-backed national stablecoin

🌍 Fireblocks partnered with ARP Digital for GCC settlement currencies 

🌍 Tether invested in LemFi to expand USDT settlement across Africa and Asia

🌍 Aztec Labs acquired ZKPassport to add privacy-preserving identity verification

🌍 The Bank for International Settlements and other leading central banks advanced with project Agorá, which seeks to test tokenised central bank reserves, with the aim of enabling always-on cross-border payments

🇪🇺 Mastercard joined the TIPS cross-currency pilot for instant payments

🇪🇺 Visa is to invest €500m in the EU over the next decade — including a new European headquarters in Frankfurt

🇪🇺 TrueLayer acquired in3 to expand into credit for Pay by Bank at the checkout — starting with pay in 3, but with more options to follow later this year

🌍 PingPong partnered with Visa to launch card-to-account payments for B2B clients

Should AI steal your job? - Financial Times

The future of AI is an AI futures market - Semafor