It’s kind of hard to draw conclusions just from what has been written in the media and in this forum, but I will give it a go.
It seems that bunq is burning through its cash ‘runway’ in a pace with which its sole investor can’t keep up or at least not at larger user numbers. To extend this runway in the short-term and achieve financial viability in the long-term, bunq introduced a Premium subscription.
The mechanics being: the subscriber that pays €8 monthly is likely to start using bunq as the main banking solution. This means less iDeal ‘Top Up’ deposits (presumably, a large expense). In combination with the monthly fee, this would spell positive gross profits.
This strategy’s contingency hinges on the fact that new users will keep flocking to bunq because of the strong value proposition. So let’s dissect this proposition.
1. Stable and reliable banking
No risky investments, so close to 0% chance of liquidity issues.
2. Conscious banking
No risky investments, so no investments that could be at odds with the user's ethics.
3. Great product features
Strong developer talent able to deliver industry-leading functionality attracts users who are frustrated by the slow pace of development in the legacy banking landscape.
4. Strong community
Low barrier interaction between the company and its users and active user forum keeps users emotionally invested in bunq and its mission.
I believe that just a fraction of users will commit to a bank solely on the first two arguments of this value proposition. This leaves bunq open to competition based on product features.
Herein lies the crux of the bunq plan-to-sustainability. The competition operates under conditions more favourable in the race to become the industry-leading banking solution. Because the competitors don’t have the same ethical boundaries as bunq, they are open to outside investments. The three main competitors, to date, have rounded up more than €150 million in venture capital putting them on a trajectory focussed solely on user acquisition (and product/feature development) without having to start pricing for short-term gross profitability. Naturally, accepting venture capital means having a solid return on investment strategy as a business goal. In the real world, this goal supersedes the goal of providing reliable and conscious banking services to users, disqualifying bunq from entering the venture capital sphere.
The conundrum:
bunq is uniquely diversifying itself by upholding a core value of environmental sustainability which directly puts it at a severe disadvantage competing in an industry-led by user demand for product features.
In easier terms, to remain competitive, bunq needs to find substantial outside capital which doesn’t undermine its ability to uphold its core values.
I think for bunq to break out of this (supposed) ‘situation’, the way forward should be:
1. Acquire outside capital
Issue shares to current users. Leverage bunq’s strong community engagement and enable believers to invest in bunq to potentially receive dividends or cash out (‘buy back’) once bunq hits certain financial goals. Leverage bunq’s technological backbone to frictionlessly let users enter into this investment opportunity. Set clear terms to protect bunq’s core values while also providing openness on the projected goals (and ROI).
2. Broaden value proposition and get head start in area where competition is scarce
As an alternative to savings accounts, create a platform to invest (equity/loan/convertible notes/etc.) in companies. A separate app: bunq Invest. Maybe even build a secondary market with investment opportunities. Enable users with savings to profit from growing economies. Use the same frictionless systems already in place from the bunq share issue.
3. Achieve mass market adoption
Use cash reserves to remain competitive and grow user base. Issue more shares timely and when growth numbers justify a substantial increase in valuation. This will keep bunq on a path of more users = more capital = even more users etc.
I understand that debt mechanics might not be something rhyming with the core values or at the very least the core business, however when it comes to debt, there is more than one perspective. I agree that getting into debt to buy an iPhone is fundamentally unsound, but when founding a local business, it can be the only reasonable option. The way bunq is structured and could be structured to accommodate this could be revolutionary when it comes to raising capital. A low barrier of entry by frictionless and transparent access to investment opportunities could create a dynamic in which fundraisers/entrepreneurs do not only acquire financial means but also (and more importantly) a collectively vested interest in the success of their venture.
I think, bunq, although young and small and probably resource-constrained, still is expertly positioned to lead this movement.