We learned earlier this year that neobanks today are no longer the neobanks of 5 years ago. This was in a session back in January 2021 with Peter Theunis and Jeroen de Bel. Back in the early 'neobank' days, neobanks built an offering and tried to create the ultimate super app, convinced to become a true challenger for big incumbent banks. Although a few cases have proven this strategy to be the right one, Morgan Wirtz, Co-Founder and CEO of Rise, observed that the newest generation of neobanks build a niche offering for a specific customer segment.

With a laser focus to serve its niche set of customers as good as possible in an agile and cost-effective way, this new generation aims for a viable financial business model, keeping in mind lower volumes. Less is more.

Morgan was our guest on October 21. Morgan is 22 years old and currently building his second venture, Rise, after setting up a marketing agency during this time at University. In high school, he did many sports, including sailing at the highest level.

Competition was a driver for him in the past, and it still is today: "Competition drives innovations, it drives creativity, drives some sort of rigorous rally, drives being surrounded by the best if you want to become better in what you're doing."

Rise is a soon to be launched neobank of the latest generation.

Their laser focus: to improve the financial education of youth.

Their target: parents that want to contribute to their children's financial understanding and wellbeing. These children are between 10 and 18 years old.

Their model: a bank app with a card for teenagers to help them consciously allocate their pocket money within the freedom and restrictions determined by their parents.

The problem to solve: financial education

"Financial education for teens is certainly one of the most underrated topics of education", explained Morgan. "It's not something you learn in school as a teen. It's quite limited as a topic within families. If you dive deeper into it, you find out that most of the time the problem is related to not understanding the basic principles of personal finance."

He explained that people often don't know how to allocate their salary intelligently. They lack understanding of savings and investments or how to spend money wisely.

This is the problem that the team wants to solve, based on insights from much testing with friends and family and the support of many psychologists to deeply understand the main principles of financial education.

To understand what the possibilities are in terms of building a solution, they conducted much research on the neobank industry, talked to a lot of like-minded communities etc.… This also made them understand that the idea of "gamification", to stimulate people to save money in a fun way, is essentially not helping to improve financial education. It may even have the reverse effect that it makes financial services even more complex.

The solution: an app to learn-by-doing

"Essentially, the product is built on two main principles; the first one being that it's all about stimulating the teen to make their own trade-off decisions", explained Morgan. When children get pocket money, money from babysitting, or birthdays today, they need to decide what to do with that money.

Rise helps them to make a conscious decision about that by providing 4 sub-accounts to their users:

• A spending account
• A savings account
• An investment account
• A charity account

On the other end, there is an interface for parents with flexible tools and functionalities to set the rules for their children. So essentially, the parents create a safe space for their children to start making financial decisions from a very young age.

By pointing youth to these trade-offs, Rise helps to overcome the biggest challenges that financial education faces, which is, according to the audience around the virtual round table, attracting the interest and awareness that a better basic financial understanding can help save lives.

Someone in the audience joined the discussion: "I think it's much deeper than just the tools and awareness and the education. A lot of it's got to do with psychology and philosophy as well."

Different archetypes with a similar background might look entirely different for finances and their financial situations. As a family, they would sit down and talk openly about finance and how to deal with it. Nevertheless, her children all deal with their finances in a different way.

I couldn't agree more, and in fact, by building tools to make trade-offs, I believe this idea of having different archetypes are somehow also covered in the setup of Rise.

The laser focus on financial education means that Rise is not planning to extend its customer life cycle beyond its target users. So, where regular banks believe in the long-term investment of attracting a young population to make money when they grow older, Rise's business plan is to become financially stable by charging parents €2,99/month.

Morgan: "The question about potentially selling this client to another traditional bank, later on, is not aligned with our values, to be honest."

Challenges and opportunities to make Rise a success

According to Morgan, Rise's key competitive advantage is the strong team behind the brand. When we asked the audience whether they believe his age of 22 is a constraint, the feedback was very constructive, going from "Yes, you are not polluted yet by industry standards or corporate legacy" to "Maybe not, but if you are well-advised by people who know the industry, why not?" They do have a strong board of advisors, as well as big corporations like Mastercard and Société Générale behind them.

Competitors like GoHenry and Xaalys are an opportunity, explained Morgan: "When it comes to other neobanks focusing on teens/adult moments, it's more everyone lifting each other since this is still a new market. And you know, the real competitor is still the traditional banks and their teen products."

As Rise is being built on Société Générale's Baas (Banking-as-a-Service) product, their IBANs are French. So for the Belgian market, they face the same challenge like, for example, Revolut (UK IBANs) and N26 (DE IBANs).

Morgan does not see the French IBANs as a primary constraint: "It's less of a problem. As soon as you have a strong value proposition, which is strong enough, you know that the parents come. Teens see it as a minor issue. So we've been much more focused on to building this value proposition and then solving those secondary issues later."

Conclusion

It was refreshing to have such a young entrepreneur around our virtual table. The way they built their product makes sense to me, and I am curious whether it will attract sufficient interest from their market segment to make the business financially stable in the long run. Belgium will likely not be big enough to achieve that.

On the other hand, I do believe that if they succeed in Belgium, with all its complexities, that they can succeed everywhere 😉.

I look forward to meeting them again next year for a follow-up session.