Neo Challenger Banks Market Size, Share, Opportunities, COVID-19 Impact, And Trends By Service Type (Loans, Mobile Banking, Checking and Savings Account, Payments and Money Transfer, Others), By End User (Business, Personal, Government), And By Geography - Forecasts From 2023 To 2028

Banking is undergoing a fast transformation. End customers are increasingly receiving products and services supplied and developed on disruptive technologies, and bank behaviours in terms of customer convenience, transparency, price, and customer service are changing. Neobanks, challenger banks, are fintech companies that provide applications, software, and other technologies to simplify mobile and internet banking. These fintech typically specialise in specific financial products such as checking and savings accounts. They are also more agile and transparent than their megabank counterparts, even though many of them collaborate with such institutions to insure their financial products. Neobanks are challenging traditional banks' current status by providing lower-cost models and hyper-distinctive customer-centric service and experiences.

Evolving needs of Gen Z consumers, integration of advanced analytics and advanced technology such as AI, ML, and IoT, the rise of the banking super apps, convince and high-interest rates offered over traditional banks will propel the demand for neo challenger banks during the forecast period. However, acquiring new customers and limited profitability is a major challenge for these companies.

One of the features that appeal to, unbanked, small and micro businesses and underbanked consumers, gig economy workers and freelancers, is the ease with which an account can be opened and operated, transfer and remittance solutions, seamless payments and alternative methods to checking your credit score. These demographics now have access because of Neobanks to financial services and products that were previously unavailable or associated with high costs and stringent agreements.

Integration of advanced technologies such as advanced analytics and AI will spur growth

Customers now have access to valuable data on their transactions, expenditures, and investments thanks to advanced analytics. Individual dashboard solutions with improved interfaces and actionable information in financial transactions are being packaged by neobanks. Banks that are integrating technology and tools can improve the client experience even further by evaluating predictive reports. To ensure a personalised and safe customer experience, analytics generate insights into customer behaviour, purchasing preferences, transaction management, fraud detection, and other topics. This is expected to augment market growth. For instance, Flybits is an embedded service that unifies and contextualises an app experience. The AI-powered system may give personalised experiences to improve customer awareness of benefits, services, and loyalty programmes based on customer data, card spending, and partnership data.

In the financial services industry, hyper-personalization has become a catchphrase. This implies employing data analytics to offer a service experience that is hyper-personalized and targeted to a single audience to provide value to clients. This can be leveraged by challenger banks and neo banks through digital access and collaboration through apps and product offers and enables them to develop product offers and services that bring value to the lives of their consumers. For instance, in 2021, Monzo, a virtual bank based in the United Kingdom, added automatic saving tools to its app. The features can round up transactions and deposit the money in a separate account, as well as automatically transfer a predetermined percentage of a customer's monthly paycheck to a savings account on payday. While these features are probably ubiquitous in the online banking business, the effectiveness of these nudges is dependent on how well they are dynamically tailored.

Neobanks have significant development potential due to their low-cost approach for end consumers, which includes no or extremely low monthly fees on banking services such as minimum balance maintenance, deposits, and withdrawals. Adoption by millennials, micro, small, and medium-sized firms (MSMEs), and individuals with intermittent revenues and wages, adoption of novel technologies, and increased consumption are some of the drivers of neo bank success. Neobanks' strong adoption rates and successful business models have caught the curiosity of investors, venture capitalists, and corporations. There is little doubt that neo-banks are well ahead of traditional banks as they provide digital services. Their distinguishing characteristics and user-friendly design make them more desirable to SMEs and the younger generation. The modernity and simplicity of their technical systems, and personalised financial solutions, may position them as industry leaders in the coming years.

North America is anticipated to hold a significant amount of the market share during the forecast period

North American region is anticipated to hold a significant amount of market share in the global neo-challenger banks. The region is anticipated to grow significantly during the forecast period. owing to the presence of major neobanks and financial institutions such as Chime, Stack, Current, Aspiration Varo and rising consumer awareness in this region. Neo-challenger banks in this region are targeting the unbanked population and tech-savvy millennials as they will play a huge part in the adoption of neo banks. According to a Federal Reserve study in America, over 22% of the population is either unbanked or underbanked. Low creditworthiness, minorities, and other factors are key contributors to the non-banked population in the United States. Neobanks target such demographics as those with lower economic status, underserved communities, and so on. The high millennial population in countries like the USA is also anticipated to propel market growth in this region.

In Latin America, banks such as C6, Neon, and Nubank are capitalising on the fintech boom to reach a larger customer base and enhance profit margins. Fintech entrepreneurs in Latin America will benefit from the rapid rise of neo-banking. Financial institutions have overthrown many established payment infrastructures in many emerging nations spanning Africa, the Middle East, and Asia to deliver customised banking solutions for the masses.

Market Key Developments

• In April 2022, WeLab Bank has become Hong Kong's first virtual bank to be granted authority to offer digital wealth advisory services. After gaining Type 1 (Dealing in Securities) and Type 4 (Advising on Securities) licences from the Hong Kong Securities and Futures Commission, the Bank soft-launched its intelligent wealth solution GoWealth Digital Wealth Advisory (GoWealth) for selected customers
• In December 2022, Greenwood, a neobank focused on Black and Latinx communities, introduced Elevate, a new subscription-based product that costs $200 per month and gives members access to private clubs, entertainment, and professional networking sites. The new subscription membership plan from the Atlanta-based fintech is the consequence of two recent acquisitions. Greenwood purchased The Gathering Spot, a networking centre and workplace, in May, followed by Valence, a professional networking platform for the Black community, in June.
• In January 2023, Twig, a London-based fintech, acquired Vybe, a French startup, to extend its services and target the Gen Z market. The French neobank was established in 2019 to provide digital banking services to Generation Z users. Vybe offers regular challenger bank services such as money transfers and contactless mobile payments.

Neo Challenger Banks Market Scope:

 

Report Metric	Details
Growth Rate	CAGR during the forecast period
Base Year	2021
Forecast Period	2023–2028
Forecast Unit (Value)	USD Billion
Segments Covered	Service Type, End User, And Geography
Regions Covered	North America, South America, Europe, Middle East and Africa, Asia Pacific
Companies Covered	Atom Bank plc, Fidor Solutions AG, Monzo Bank Limited, Movencorp Inc., MYBank, Number 26GmbH, Simple Finance Technology Corporation, Tandem Bank, UBank Limited, WeBank
Customization Scope	Free report customization with purchase

 

Segmentation:

• By  Service Type
  • Loans
  • Mobile Banking
  • Checking and Savings Account
  • Payments and Money Transfer
  • Others
• By End User
  • Business
  • Personal
  • Government
• By Geography
  • North America
    • USA
    • Canada
    • Others
  • South America
    • Brazil
    • Others
  • Europe
    • Germany
    • UK
    • France
    • Others
  • Middle East and Africa
    • Israel
    • Others
  • Asia Pacific
    • China
    • Japan
    • South Korea
    • India
    • Taiwan
    • Thailand
    • Indonesia
    • Others

1. INTRODUCTION

1.1. Market Overview

1.2. COVID-19 Scenario

1.3. Market Definition

1.4. Market Segmentation

 

2. RESEARCH METHODOLOGY  

2.1. Research Data

2.2. Assumptions

 

3. EXECUTIVE SUMMARY

3.1. Research Highlights

 

4. MARKET DYNAMICS

4.1. Market Drivers

4.2. Market Restraints

4.3. Porter’s Five Force Analysis

4.3.1. Bargaining Power of Suppliers

4.3.2. Bargaining Power of Buyers

4.3.3. Threat of New Entrants

4.3.4. Threat of Substitutes

4.3.5. Competitive Rivalry in the Industry

4.4. Industry Value Chain Analysis

 

5. NEO AND CHALLENGER BANK MARKET ANALYSIS, BY SERVICE TYPE

5.1. Introduction

5.2. Loans

5.3. Mobile Banking

5.4. Checking & Savings Account

5.5. Payments & Money Transfer

5.6. Others

 

6. NEO AND CHALLENGER BANK MARKET ANALYSIS, BY END-USER

6.1. Introduction

6.2. Business

6.3. Personal

 

7. NEO AND CHALLENGER BANK MARKET, BY GEOGRAPHY

7.1. Introduction

7.2. North America

7.2.1. USA

7.2.2. Canada

7.2.3. Mexico

7.3. South America

7.3.1. Brazil

7.3.2. Argentina

7.3.3. Others

7.4. Europe

7.4.1. Germany

7.4.2. France

7.4.3. United Kingdom

7.4.4. Spain

7.4.5. Others

7.5. Middle East and Africa

7.5.1. Saudi Arabia

7.5.2. UAE

7.5.3. Others

7.6. Asia Pacific

7.6.1. China

7.6.2. Japan

7.6.3. South Korea

7.6.4. India

7.6.5. Taiwan

7.6.6. Thailand

7.6.7. Others

 

8. COMPETITIVE ENVIRONMENT AND ANALYSIS

8.1. Major Players and Strategy Analysis

8.2. Emerging Players and Market Lucrativeness

8.3. Mergers, Acquisitions, Agreements, and Collaborations

8.4. Vendor Competitiveness Matrix

 

9. COMPANY PROFILES

9.1. Atom Bank plc

9.2. Fidor Solutions AG

9.3. Monzo Bank Limited

9.4. Movencorp Inc.

9.5. MYBank

9.6. Number 26GmbH

9.7. Simple Finance Technology Corporation

9.8. Tandem Bank

9.9. UBank Limited

9.10. WeBank

Atom Bank plc

Fidor Solutions AG

Monzo Bank Limited

Movencorp Inc.

MYBank

Number 26GmbH

Simple Finance Technology Corporation

Tandem Bank

UBank Limited

WeBank