Burnmark's Challenger Banking Quadrant Q1 '19

1. The Challenger Banking Quadrant Q1 2019 MARKET STRENGTH, GROWTH POTENTIAL Transformative Pioneering Embryonic Meteoric PRODUCT INNOVATION, BRAND MOMENTUM

2. Data points used Product Innovation and Brand Momentum (x-axis) Customer acquisition (Customer base, customer base growth rate, transaction volume) Investments (Total funding, latest funding, investor quality) Partner ecosystem (Number of technology partners, number of business partners) Mobile app performance (App store ratings, monthly downloads, download growth, app features) Social media performance (Twitter response time, followers on twitter, Facebook, Instagram, and LinkedIn) Financial performance (Revenue, profit) Technology initiatives (AI tools, blockchain, data analytics) Market Strength and Growth Potential (y-axis) API Initiatives (API integrations, API offered, API partners) Banking license (Type of license, year of license, geographies) Product offerings and onboarding (Number of products, customer onboarding process) Expansion plans (Geography expansion, product line expansion) Hiring plans (Time since launch, number of employees, future hiring plans) Partnerships quality (Business partners, technology partners) The team Awards and recognition

3. Top 10 to watch out for Xinja Bank, launched in 2017, has raised AUD 2.4mn with a crowdfunding round and already has an Australian credit license. Arival is the first digital bank for small businesses, GIGs and crypto-related SMEs operating under a US-based banking license. Digital SME Bank Allica (previously CivilisedBank), has resubmitted its banking licence application to the Bank of England in Nov’18. Coconut, a provider of current account for freelancers, and small business owners, has recently raised GBP 1.3mn in equity crowdfunding. BABB is building a decentralized banking platform and has raised $20mn in a token sale in Feb ’18 and GBP 1.4mn in an equity crowd-sale in Aug ’18. Qonto provides a banking alternative for freelancers, startups and SMEs and has raised $36.1mn so far, the latest being $23mn in Sept ’18 . Holvi, a digital banking service for freelancers and entrepreneurs, was acquired by BBVA in 2016 and is currently conducting a pilot program to launch in the UK. Loot offers a digital current account and contactless prepaid card aimed at students and millennials. In Jan ’19 RBS has invested GBP 2mn to take a 25% stake in Loot. Penta is building a platform connecting the best financial services to the bank account in partnership with solarisBank and has raised EUR 9.2mn in funding. Moneemint (previously Ummah Finance), aimed at millennials in the UK and Europe, is built on the foundations of socially responsible Islamic banking and is in the process of applying for a UK banking license.

4. § Burnmarkhasalistof200+challengerbanksthatisregularly kepttrackofanddataupdatedeveryquarter Someexamplesofbankswecoverare..

6. Toreceivemonthlyinsightonchallengerbanks,their marketmovements,andnewplayersinthespace, pleasereachouttoinfo@burnmark.com tobecomea client.

7. The Fine Print • Burnmark defines Challenger Banks as technology-driven and customer-centric financial institutions who rely purely on digital channels for their customer onboarding and servicing, such as apps, chatbots or websites. Several challenger banks are clustered around markets like the UK, EU and the US. For this quadrant, we have considered 3 kinds of challenger banks: • Relationship-only challenger banks: This model involves challenger banks that have no banking license and only offer customers a front-end service, in partnership with traditional bank to use their backend infrastructure or banking license or both. Examples are Simple, Moven, etc. • • Digital subsidiaries of incumbents: There are the companies that are spun off from incumbent banks as their digital subsidiaries with a separate brand. Examples are Hello Bank by BNP Paribas, Digibank by DBS, Pepper by Bank Leumi, etc. Pure play challenger banks: These challenger banks seek to become a one-stop-shop bank from the outset, but without branch-based distribution channels and set up as mobile banks with a banking license. Examples are Starling, Monzo, Tandem, Atom, N26, etc. • The report does not include the banks that have received their licenses or were launched since Q2 2018, as it would be too early to analyse their strengths and market potential, which means we did not include some interesting ones like Zopa (UK), Varo Money (US), Finn (US) and Bo (UK). The report does not include single service organizations who only offer, or plan to offer, a payments-related product like mobile wallets or credit card or only loan products. The analysis of the challenger banks in the quadrant is based on the data captured till December 2018. • • Methodology • Burnmark conducted initial research to identify 200+ challenger banks active across the UK, continental Europe, USA, Asia, Australia and Latin America. We did an initial comparative analysis of 150+ challenger banks to shortlist the top 30 challenger banks who have shown a strong performance across various parameters as mentioned above. Data was collected from primary sources such as the bank’s website, self-published blogs, annual reports, social media accounts, app store reviews, etc. Additional supporting data was collected from secondary sources such as crunchbase.com, craft.co, bankingtech.com, finextra.com, Financial Times, sifter.com, LinkedIn etc. We also took qualitative feedback from key stakeholders in the market. For standardization of analysis, quantitative parameters such as customer base of banks and growth of customer base were normalised to a monthly basis and funding amounts were normalised to USD. In case of digital subsidiaries of incumbents, for certain parameters, we used proportionate data from parent firms. • •

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