Neon banking app slashes fees in growth drive

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Matthew Allen
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Neon appears to be aiming to be Switzerland’s answer to Revolut. (Neon)

Swiss financial services company Neon says it will scrap card fees for customers shopping abroad to spearhead an ambitious drive to boost the number of clients to 250,000 in the next two years.

The Zurich-based fintech company has laid down a challenge to foreign competitors, such as Revolut and N26, with its announcement. From Monday (January 20) customers will no longer have to pay a combined 3.3% commission and exchange rate mark-up using the Neon Mastercard outside of Switzerland.

“We are going into attack mode,” Neonexternal link co-founder and chief marketing officer Julius Kirscheneder told swissinfo.ch. “We want to move fast and challenge the market. There is a clear need for Swiss-driven financial services of this nature.”

Neon also stated on Mondayexternal link that is also lowering its fees for withdrawing cash abroad. The existing 1.5% commission will remain, but it has dropped an additional CHF2 flat fee for this service.

The move appears to be aimed at disrupting the progress of other so-called “challenger banks” (online banking services with reduced fees) that have moved into Switzerland from Germany and Britain.

Britain’s Revolut said last year that it has already signed up 250,000 customers in Switzerland, while at the end of 2019, Neon had 12,500 users. Neon believes that numbers will be significantly boosted by slashing fees on foreign purchases, which in turn will compensate for reduced fee revenues.

The Neon mobile phone app is backed by Hypothekarbank Lenzburg, its custodian bank that holds customer deposits – keeping customer’s money and data inside Switzerland. Neon says it has no immediate plans to apply for its own banking license or to expand its business outside of Switzerland.

Opportunities for growth

Fintech consultant Urs Bolt says the Neon announcement is positive news for Swiss banking customers. “Competition in the challenger bank space is clearly increasing,” he told swissinfo.ch. “Neon now needs to think big and expand fast so that it can keep on delivering these low-cost services.”

In common with foreign challenger banking services, Neon’s business model relies on attracting large numbers of clients quickly and offering a range of optional fee generating services on top of the low-cost basic payment package.

“Neon now needs to deliver Swiss-specific services that are attractive to local customers. These could include financial services for micro-companies or packages that appeal to the freelance ‘gig economy’”.

Another differentiator that could prove the difference between success and failure between challenger banks is providing the slickest technology platform for onboarding and ease of use, Bolt added.