Neobanking is bouncing back after the coronavirus pandemic time, and this is poised to benefit from this surge after lockdowns have eased around the world. Neobanks especially are becoming major players in the greater financial services industry as they work to perfect digital account execution by stripping legacy friction out of fintech processes.
What are neobanks?
Neobanks, or mobile-only banks, aren’t burdened by traditional banking technology and costly networks of physical branches. Instead, all of their day to day banking services are conducted completely online via desktop systems or mobile app.
These Neobanks are also for business and provide an opportunity to access cheaper financial resources for new clients and market segments. These SME neobanks offer competitive prices for the services to business clients.As these fintech startups seek to differentiate themselves, the biggest opportunities lie in international expansion, obtaining a banking license for different regions and targeting niche sub-segments of business market.
Neobanks vs Traditional Banks
The primary difference between neobanks and traditional banks is that neobanks are entirely digital without any need of physical branch locations whatsoever—they’re accessed via a computer, tablet, or smartphones. To remain competitive, traditional banks may leverage the same fintech technology from neobanks so their consumers can benefit from cheap digital offerings.
Consumers’ growing frustration with legacy banking service providers stems from their old legacy technology and high banking costs. These downfalls combined with increased appetite for digital solutions of millennials, has accelerated the trends of neobanking. Increased consumer interest in swapping out cash and credit cards for financial service on mobile apps is stimulating competition globally, which has driven these neobanks to roll out extravagant customer friendly features, like overdraft protection and other sign-up incentives.
Neobank Market growth
The rise of neobanks is largely supported by the growing demand for digital and mobile banking services from younger consumers, as well as increasing trust in digital banking by consumers of all ages around the world.
The US has one of the highest numbers of Neobanks account holders at 23.1 million. It is poised to retain this growth due to the country’s massive population and ability to boast some of the world’s oldest Neobanks.
Overall, there will be more than 47.5 million digital account holders in the US by 2024, an increase of 19.8% from 2020, and US Neobanks’ penetration is expected to increase by 8.9% between 2020 and 2024. Here is the list of most notable and well established NeoBanks around the world, sometimes referred to as Digital banks, Mobile only banks or App only banks.
Top Neobanks in the US
Follwoing are the top 4 US Neobanks, by market of digital account holders:
- Chime (13.1 million)
- Current (4.0 million)
- Aspiration (3.0 million)
- Varo (2.7 million)
Top Neobanks around the World
Following are the top 4 Neobanks globally, in number of digital account holders:
- Monzo (5.8 million)
- Revolut (3.1 million)
- Starling (1.9 million)
- Monese (1.8 million)