The service, covering everyday banking needs for most citizens, goes head-to-head with old banks. Launched in Estonia, Netherlands, Spain.

Estonian Pocopay launched its banking service on Thursday in three eurozone countries in one of the first direct assaults by new startups to the core business of old banking groups.

So far, startups in the sector have been either focused on limited audience – for example Monese for immigrants in Britain, or Holvi for small enterprises – or focusing on particular services, like all the currency exchange apps.

Pocopay, which started from an empty sheet of paper in the summer of 2014 has since been working on their own core banking service, designing a simple app for consumers and at the same time building up the back-end.

I would like to call Pocopay a startup bank, but founder Indrek Neivelt is somewhat uncomfortable with both words.

As the company does not operate under banking license (hence it does not take deposits or issue mortgages) it cannot call itself a bank. At the same time, Neivelt has deep know-how of the old banking world, having been one of the key drivers of Hansapank, the largest banking group in the Baltics, which belongs now to Swedbank.

Indrek Neivelt, Tea Trahov and Linnar Viik are the co-founders of PocoPay Photo: Pocopay

And the approach is way too thorough to be a classical startup. “When I presented recently to some fintech fund managers in Frankfurt they seriously asked why we didn’t just glue our app on top of some banks’ core platforms. They were serious. The assumption seems to be that you build something which barely holds together with some ducktape and you fix it as you go. We built a solid house first. Our underlining assumption is that the banking world is not as efficient as it should be – hence we cannot build more efficient solutions on top of the current inefficient platforms.”

Pocopay is launching in three countries first – Estonia, Netherlands and Spain – and like startups it plans to learn from these first experiences before expanding the service to other European countries. The service, which comes with your own bank card and bank account, is open to all eurozone citizens and people with living permits in eurozone countries.

When the team started in late summer 2014 it had a clear vision of the upcoming changes in the banking sector. The offering had to be wide enough not to fall through the cracks when the market changed and at the same time not as complex as the banks running portfolios today, as these are too costly to maintain.

“We don’t know how banking will look in 10 years, but it’s clear it’s going to be like it is today. We will likely be using the word ‘bank’ in 10 years too, but it’s not the ‘bank’ as we know it today.”

The Pocopay team had the benefit of no legacy systems – it focused early on building the best possible thing for the consumer. After ArcticStartup saw the service in action at Pocopay headquarters in downtown Tallinn earlier this week we have to admit – it looks like no other online bank. When you open the app just one large ball is on your screen and in the middle is the amount of money you have on your account. When you drag the ball in different directions you open the features.

Simplicity was partly driven by the business plan. The aim is to launch quickly across the eurozone so the user interface had to be graphical with as little text as possible.

The challenge for Pocopay is to get the word out – changing the behaviour of even a fraction of 330 million potential clients is a huge task – but Neivelt is certain this is about to change. “Never before has changing bank account been as easy as it is today.”

The bank has no plans to ever open brick-and-mortar outlets and the plastic cards it issues now will likely be the last ones, says Neivelt. “Soon it will all be in the phone.” And at that point an established mobile-first bank might be a much much bigger deal than it is in February 2016.



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