Dutch fintech company Bunq, after achieving its first full year of profitability, is making a strategic return to the UK market. This move comes three years after it ceased operations in the UK due to Brexit complications.
Bunq’s Journey to Profitability
Founded in 2012 and headquartered in the Netherlands, Bunq has emerged as a significant player in the European neobanking sector. In 2023, Bunq reported a net profit of €53.1 million, a remarkable feat considering its gross income increased by 20% in the last quarter of 2023, and its gross interest income soared by 488%. This profitability was underpinned by a substantial increase in customer deposits, from €1.8 billion in 2022 to approximately €7 billion at the end of 2023.
Expansion Strategy: Targeting the UK Market
Bunq’s expansion into the UK is driven by the region’s prominence in the fintech sector and its high number of digital nomads. Ali Niknam, Bunq’s CEO, emphasized the importance of the UK market, noting that it is home to the second-highest number of digital nomads globally. The neobank, which already serves pre-Brexit UK customers, sees an opportunity to tap into a market that includes an estimated 2.8 million British digital nomads.
The Road to Re-entry in the UK
Bunq’s re-entry into the UK market is not its first foray. The company had operated in the UK before Brexit and continued to serve existing customers in the region. To facilitate its re-entry, Bunq has applied for an E-Money Institution (EMI) license in the UK. This step is crucial for onboarding new customers and re-establishing its presence in the market. Additionally, in November 2023, Bunq UK Ltd was incorporated at Companies House, indicating a well-planned strategy for growth in the UK market.
The Significance of Brexit and International Trade Dynamics
Brexit has been a turning point for many businesses, including those in the financial sector. The UK’s departure from the EU necessitated the forging of new trade relationships and priorities. While the UK experienced a decrease in financial services exports to the EU immediately post-Brexit, it has been actively engaging in international trade agreements to mitigate these losses. For instance, the UK joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in July 2023, and talks with South Korea over a new trade deal began in November 2023.
Challenges and Opportunities Ahead
While Bunq faces challenges in reintegrating into the UK market post-Brexit, the opportunities are substantial. The UK, particularly London, remains a hub for fintech innovation. The focus on international trade and the digital nomad sector presents a unique opportunity for Bunq to establish a significant foothold.
Bunq’s strategic return to the UK market exemplifies how fintech companies adapt and thrive in dynamic economic landscapes. With its solid profitability and a clear focus on catering to the needs of digital nomads, Bunq is poised to make a significant impact in the UK fintech sector.
