Why would a technology entrepreneur with no experience in banking want to open a bank?

This was a question that I posed to Ali Niknam, the founder of Dutch challenger bank Bunq, when I sat down with him in August.

Niknam had come to Ireland to meet the team of Capitalflow, the Irish alternative lender that it acquired a month before. The deal was part of a larger transaction whereby Pollen Street Capital, the major shareholder in Capitalflow, took a 10 per cent stake in Bunq for €193 million. The acquisition valued Capitalflow, founded by Ronan Horgan in 2015, at €141 million.

Niknam was a fascinating interview. He started coding at the age of eight, began investing in the stock market at 12 and launched his first company when he was just 16. By 30, he had made enough money never to work again. Instead, a decade ago, he looked at the global financial crisis and reckoned too many people looking for someone to blame and not enough people looking to come up with solutions. So, he decided to do something about it.

A decade – and €100 million of his own funds – later, his bank, Bunq, is active in 30 markets, has more than €1 billion in deposits, and recently closed a funding round that values the business at €1.6 billion.

During our interview, Niknam spoke about the Capitalflow deal, and why he believed the challenger banks would one day usurp the cost-heavy traditional banks. However, in the short term, he said the challengers were being hurt by a regulatory system that favoured the incumbents.

One issue stifling his broader ambitions, both in Ireland and elsewhere, was the thorny issues of European IBANs. “From a technology point of view, there is no reason not to be active here. One of the challenges as a bank is all the regulatory stuff you have to deal with,” he told me.

While a company can’t refuse to accept IBANs from the Single European Payments Area (Sepa), it is generally acknowledged that there are significant logistical issues around IBANs. A lot of old finance systems still ask for account numbers and sort codes. Without an Irish IBAN, it is very hard for any new challenger bank to take on the pillar banks in the deposit account market.

In recent weeks, Bunq, which has a banking licence from the Dutch Central Bank, received authorisation from the Central Bank of Ireland to operate here on a branch basis under European Economic Area passporting rules. The authorisation gives it the right to issue IBANs, and the company announced last week that will be the first so-called neobank in the market to offer accounts with Irish IBANs.

It said the offering, available through its online app, would enable customers to easily set up direct debits and make and receive payments including monthly salaries. This is a key point. An Irish IBAN gives the company a practical advantage over Revolut and N26. The challenger banks have developed a large customer base around payments. But they have struggled to convince many people to have their salaries paid into their accounts. The IBAN will help.

Essentially, Bunq and Niknam are making a play for Ulster Bank and KBC’s current account holders as the foreign-owned lenders retreat from the Republic.

They are not the only ones. AIB boss Colin Hunt told reporters after the bank’s AGM last week that it intended to recruit up to 700 temporary staff to help manage an expected surge in Ulster Bank and KBC Bank Ireland customers seeking to open current and deposit accounts.

PTSB said the number of new current account openings in the first quarter jumped over 170 per cent compared to this time last year. Again, the reason is the departure of Ulster Bank and KBC. 

But it all begs a big question. Can a challenger bank like Bunq outflank the incumbents? And, stripping it back further, what would success look like?

Banks makes money in a few ways. They offer foreign exchange, they manage wealth, they charge fees, they provide financial products like insurance. But banks’ most profitable business by far is the lending of money. This is the business challengers like Bunq would love to disrupt.

And it’s why arcane issues around central bank licences and IBANs matter. To lend money profitably, it’s not enough for challenger banks to have customers. To lend money profitably, challenger banks need their customers to deposit money with them. An IBAN is a critical bit of infrastructure that eases the process of depositing funds into a Bunq account.

Attracting deposits has so far been the challenger banks’ Achilles heel. They’ve done a great job of signing up lots of users. But their users don’t deposit much money, which means the challenger banks don’t have much money to lend out, which is why, as a group, they’re not yet highly profitable.

The incumbent banks have the opposite problem. Their customers know them well and trust them with their money. They have big money-lending businesses. But they struggle with the technology side, and with attracting new users.

Success for Bunq would mean lots of users emailing their HR managers with their new Bunq IBAN, and asking them to switch over the bank account into which they receive their salary. Once this starts to happen, making money by lending those funds out will be relatively easy. 

When we met last August, Niknam looked more like the techie he still claims to be rather than the CEO of a fast-growing, yet profitable, financial institution. During the interview, he joked: “Don’t call me a banker. I am not a banker.”

However, as it deepens its bank offering in Ireland, even Niknam would acknowledge that he is now more banker than techie.


Elsewhere this week, Francesca had the story of “a dizzyingly complex international money trail spanning Hong Kong, Zurich, Abu Dhabi and the Isle of Man.” The Nolan family, owner of Nolan Transport, claims that their former solicitor allegedly misappropriated nearly €7 million from their pension scheme. The alleged financial crime involves multiple jurisdictions, a $100 million loan, and a Cork land deal. The case continues this week.

What did St Vincent’s Healthcare Group want from its maternity hospital deal with the government, and what did it get? Its key red line, Thomas wrote this week, was the protection of its property asset. Religious ethos was no longer the sticking point in a deal. It was all about land.

Delta partners is changing gears. The venture capital fund, founded in 1994, has taken on two new partners and launched a new fund. Senior partner Maurice Roche and new recruit Richard Barnwell told me about their ambition to serve a market they believe other funds are not covering.

Some months ago, Sean started to look into Enterprise Ireland’s investment returns. EI had been Europe’s most active VC investor the year before, and Sean planned to find out how its investments had performed. Sean never got an answer to that specific question, but he learned a lot about EI in the process.

Is Ireland a good or bad place to live? The answer to this question depends on your definition of “good” or “bad”, your points of reference, and your units of comparison. Last week Stephen Kinsella decided to have a debate about it. With himself.

Sinead looked at the insidious nature of short-term credit and the rise of short-term lenders like Klarna. She wrote: “European regulators need to take immediate action to protect innocent consumers. As with the United States, it starts with a dress, an iPhone or even a takeaway meal on credit. In ten years’ time, the beast that is Buy Now, Pay Later becomes a profit-machine that has swallowed up essential societal services like education and healthcare. By then, Europeans will wonder why the harder they work, the poorer they become. That is, most Europeans. Klarna’s investors will be the exception.”