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Neobanks

Making banking work, without the paperwork

Overview

Neobanks provide digital-only banking services via web portals and mobile apps

Neobanks, commonly known as challenger banks, virtual banks, or digital banks, are financial institutions (or providers of one or more banking services) that operate exclusively in the digital space, without any form of physical presence. These banks are similar to traditional banks but differentiate themselves by offering their services through websites and mobile apps, allowing them to operate without a brick-and-mortar presence. Neobanks also take the banking process a step further by providing additional services, such as access to investment platforms, personal finance management (PFM) tools, and financial education tools.

The emergence of neobanks has been fuelled by various technological advancements, such as high smartphone penetration and the development of banking-as-a-service (BaaS) and lending-as-a-service (LaaS). Additionally, regulatory developments in open banking have also forced financial institutions to adopt more transparent policies concerning customer data. Neobanks and other fintechs can then leverage this data to offer customers holistic and personalized services. Concerning demand, neobanks have lured customers with their lower fee structures, higher convenience, and improved user interfaces. They have also proven successful in carving out niches and attracting demographics that have been underserved by traditional banks, such as low-income groups, Gen Z, immigrants, and people of color.

What's driving this industry?
Market Sizing

The combined market for neobanks in the US could reach USD 5.8 - 9.0 billion by 2025

Conservative case

USD 5.8 Bn

Base case

USD 7.4 Bn

Expansion case

USD 9.0 Bn

USD billion0246810202020212022202320242025
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COVID-19 IMPACT

Neobanks witnessed a temporary setback at the onset of the Covid-19 pandemic due to the contextual instability and uncertainty, as well as individuals choosing to retain their money with large, established banks. 

  • Monzo’s app downloads declined 36% month-over-month in March 2020 ( vs. +28% month-over-month in March 2019). 

  • Revolut’s app downloads declined 18% month-over-month in March 2020 ( vs. +13% month-over-month in March 2019), and the company reported a 40% revenue decline in the early days of the pandemic.

However, Neobanks rebounded strongly in the latter part of 2020 as consumers were more inclined to switch to digital and contactless transactions.

  • Nubank’s customer base grew to reach around 36 million in 2020, which nearly doubled from 20 million in 2019. Over the same period, total deposits held by the company grew by 2.6 times, while its loan portfolio grew 49% YoY. 

  • Revolut achieved revenue growth of 50% YoY in 2020 while also breaking even for the first time in November 2020.

  • Starling Bank claimed revenue growth of 400% YoY as of March 2021. The company also achieved profitability for the first time in October 2020.

  • Chime’s customer base grew by 50% YoY to reach close to 12 million customers in 2020.  

  • N26 reported a growth of 40% YoY in customer numbers in 2020 to reach a total of 7 million.

  • Monzo launched its business banking accounts in March 2020 and had amassed a total of 60,000 customers by December 2020. The company also launched its paid accounts for individual customers in July 2020, which reached a total customer base of 135,000 by March 2021.

View detail

Market Mapping


The neobank industry operates across four segments, with the key differentiating factors reduced to the type of product offered and the target market. Accordingly, the two main product types are digital banking and digital lending, provided either to individual customers (B2C) or businesses (B2B). 

Neobanks that provide digital banking services and target the B2C segment account for the majority of companies in the industry hub. Within the B2C segment, disruptors can be classified further based on the type of individuals targeted. Some of the older, more established growth-stage neobanks, such as Nubank, Revolut, and Chime, focused on differentiating themselves by offering attractive product features such as high-yielding savings accounts, faster paychecks, and access to credit products, thus catering to a broad market. Newer neobanks that have emerged over the past two to three years have focused on carving a niche for themselves by focusing on specific consumer segments, such as teens or ethnic minorities. Similarly, players in the B2B segment have also increasingly focused on serving specific customers within the segment, such as freelancers. 

Incumbents mostly comprise large, established banks that have entered the neobank space mainly through the in-house development of digital-only solutions. Unlike the disruptors, incumbents appear to be equally focused on the B2C and B2B segments rather than just the B2C segment.

Incumbents
Growth
Early
Seed
Pre-Seed
Digital Banking - General (B2C)
?
Digital Banking - Specialized (B2C)
?
Digital Banking (B2B)
?
Digital Lending (B2C)
?
Digital Lending (B2B)
?
Technologies
Technologies
Technologies
Technologies
Technologies
PayPal
Goldman Sachs (Marcus)
JPMorgan
Orange (Orange Bank, Anytime)
Acorns
SoFi
H&R Block (Spruce)
Marygold Companies
Virgin Money
Walmart (Hazel by Walmart)
BBVA
M1 Finance
UniCredit (BuddyBank)
Nubank
Chime
C6 Bank
N26
Revolut
Monzo
Starling Bank
Varo
Zopa
Atom Bank
Neon
Upgrade
Dave
MoneyLion
Lunar
bunq
KOHO
Lydia
Curve
Monese
Douugh
BM Technologies
Allica Bank
Klar
Neo Financial
Vivid Money
Point
HMBradley
Cogni
Recognise Bank
Northmill Bank
Oxygen
Kroo
AltPay
FIBR
Marygold & Co
Ashman Finance
Remitly (Passbook)
Standard Chartered
CaixaBank (ImaginBank)
Avant
Greenlight
Current
Aspiration
Step
Tandem
GoHenry
One
Zolve
MAJORITY
Pockit
Monument Bank
Good Money
Empower
Fair
pockid
Greenwood
Copper
Tomorrow
First Boulevard
Helios
Ando
Daylight
Cheese
Pennyworth
KlaDot
Atmos Financial
American Express (Kabbage)
JPMorgan
Orange (Orange Bank, Anytime)
HSBC
Virgin Money
Cogent Bank
Ageras
Société Générale (Shine)
NatWest (Mettle)
Nubank
C6 Bank
N26
Revolut
Brex
Monzo
Starling Bank
BlueVine
Atom Bank
Neon
Qonto
Lunar
bunq
Tide Bank
Monese
Allica Bank
Rho
Grasshopper
Mercury
Novo
ANNA
Lili
Nearside
Found
Recognise Bank
Oxygen
NorthOne
Countingup
Relay
Finom
Juni
AltPay
Pillar
Guava
BetaBank
Goldman Sachs (Marcus)
Orange (Orange Bank, Anytime)
CaixaBank (ImaginBank)
SoFi
Virgin Money
Walmart (Hazel by Walmart)
M1 Finance
UniCredit (BuddyBank)
Nubank
Avant
Revolut
Monzo
Varo
Zopa
Neon
Petal
Upgrade
Dave
MoneyLion
Oportun
Aspiration
Tandem
TomoCredit
BM Technologies
Stori
Klar
Neo Financial
One
Zolve
HMBradley
Kikoff
Monument Bank
Northmill Bank
Empower
Koyo
Kroo
Keebo
Fiinu
X1
American Express (Kabbage)
HSBC
Virgin Money
Société Générale (Shine)
Nubank
Brex
Monzo
Starling Bank
BlueVine
Atom Bank
Neon
Rho
Grasshopper
Nearside
Banca AideXa
Good Money
Recognise Bank
Juni
FIBR
BetaBank
Ashman Finance

The Disruptors


B2C neobanks dominate while large players establish a presence in the B2B market

Disruptors in the neobanks space mainly comprise players providing digital banking services to individuals (B2C). The highest-funded disruptors, including Nubank, Revolut, and Chime, also primarily center their services around individual checking or savings accounts. Additionally, there are some consumer-focused neobanks that focus specifically on providing credit-related products, including Avant and Upgrade. Although most neobanks are concentrating on the B2C space, some players, such as Nubank, Revolut, and Starling Bank, have recently placed their efforts on establishing a presence in the B2B segment as well. 

Established pure players operating in the B2B segment include BlueVine, Tide Bank, Qonto, Grasshopper, and Rho. Similar to the B2C segment, most disruptors in this space focus on providing digital banking products, although a few players such as BlueVine and Grasshopper also provide credit-related products. 

Almost all neobanks remain privately funded as of August 2021. A few neobanks have announced plans to go public, such as MoneyLion, which announced in February 2021 that it would go public via a SPAC. Nubank has also announced plans to go public via an IPO in the US, with the transaction expected to be finalized in late 2021 or early 2022. 

Digital Banking - General (B2C)

?

Disruptors

?
Funding in USD Millions
MoneyLion
Public - Market cap USD 533.4 mn
Dave
Public - Market cap USD 249.4 mn
BM Technologies
Public - Market cap USD 77.3 mn
Douugh
Public - Market cap USD 18.6 mn
Nubank
3908
Chime
2293
C6 Bank
2290
N26
1719
Revolut
1711
Monzo
1123
Starling Bank
1086
Varo
992
Zopa
792
Atom Bank
742
Neon
720
Upgrade
587
Lunar
448
Allica Bank
282
bunq
281
KOHO
279
Lydia
263
Klar
258
Neo Financial
236
Vivid Money
205
Curve
183
Monese
170
Kroo
72
Point
59
HMBradley
52
Recognise Bank
30
Northmill Bank
30
Oxygen
24
Watchlist
?
Cogni
Marygold & Co
AltPay
FIBR
Ashman Finance

Digital Banking - Specialized (B2C)

?

Disruptors

?
Funding in USD Millions
Avant
1829
Greenlight
557
Current
402
Aspiration
250
Step
191
Tandem
176
GoHenry
66
One
66
Zolve
55
MAJORITY
46
Greenwood
43
Copper
42
Pockit
40
Monument Bank
39
Good Money
39
Tomorrow
29
Empower
25
First Boulevard
20
Fair
20
pockid
5
Watchlist
?
Helios
Ando
Daylight
Cheese
Pennyworth
Atmos Financial
KlaDot

Digital Banking (B2B)

?

Disruptors

?
Funding in USD Millions
Nubank
3908
C6 Bank
2290
N26
1719
Revolut
1711
Brex
1457
Monzo
1123
Starling Bank
1086
BlueVine
768
Atom Bank
742
Neon
720
Qonto
709
Lunar
448
Allica Bank
282
Juni
282
bunq
281
Tide Bank
195
Rho
195
Monese
170
Grasshopper
162
Mercury
152
Novo
136
ANNA
82
Lili
80
Nearside
77
Found
75
Recognise Bank
30
Oxygen
24
NorthOne
23
Countingup
21
Relay
19
Finom
19
Watchlist
?
Guava
AltPay
BetaBank
Pillar

Digital Lending (B2C)

?

Disruptors

?
Funding in USD Millions
MoneyLion
Public - Market cap USD 533.4 mn
Dave
Public - Market cap USD 249.4 mn
BM Technologies
Public - Market cap USD 77.3 mn
Fiinu
Public - Market cap USD 59.9 mn
Nubank
3908
Avant
1829
Revolut
1711
Monzo
1123
Varo
992
Zopa
792
Neon
720
Petal
705
Upgrade
587
Oportun
416
Stori
400
Klar
258
Aspiration
250
Neo Financial
236
Tandem
176
TomoCredit
139
Kroo
72
One
66
Zolve
55
HMBradley
52
X1
47
Kikoff
43
Monument Bank
39
Northmill Bank
30
Empower
25
Koyo
12
Watchlist
?
Keebo

Digital Lending (B2B)

?

Disruptors

?
Funding in USD Millions
Nubank
3908
Brex
1457
Monzo
1123
Starling Bank
1086
BlueVine
768
Atom Bank
742
Neon
720
Juni
282
Rho
195
Grasshopper
162
Nearside
77
Banca AideXa
53
Good Money
39
Recognise Bank
30
Watchlist
?
FIBR
Ashman Finance
BetaBank

MoneyLion

MoneyLion offers banking and investment products via a web portal and a mobile app. Within its banking segment, the company offers lending products, investment products, and deposit accounts, which include a debit card. 

Under its lending segment, the company offers cash advances dubbed as “Instacash” of up to USD 250, with no interest, monthly fees, or credit checks. The company also offers “Credit Builder Plus”, a credit building facility that allows customers to apply for loans and improve their credit scores. Under this facility, customers would be allowed to apply for loans of up to USD 1,000 and set up automatic payments over 12 months. On-time payments would then be directly sent to credit bureaus, and the company claims that over half of its members have been able to raise their score by over 42 points within 60 days. The credit builder facility is offered at USD 19.99 per month.

The company also provides access to investment products such as stocks and bond ETFs, under which customers are able to set up automated investments and create personalized investment portfolios; it is offered free of charge. The company also intends to include access to cryptocurrencies under its investment portfolio. As of December 2021, MoneyLion served 3.3 million customers.

The company’s deposit accounts are offered under its brand “RoarMoney”, which it launched in July 2020, under the license of MetaBank, with Mastercard acting as the exclusive card network for its debit cards. Features offered under RoarMoney include the receipt of paychecks up to two days in advance, the usage of debit cards with no ATM or other fees, price protection - which offers refunds for the difference if customers find a purchased product at a lower price within 90 days, cashback rewards, and Personal Finance Management (PFM) tools. The company also aims to offer a Buy Now Pay Later (BNPL) facility under its RoarMoney account dubbed as “Overtime”. Customers have the choice of using RoarMoney as a standalone bank account, or using it together with the company’s lending and investment products; it is priced at USD 1 dollar per month. 

In February 2021, the company went public via a merger with a Special-Purpose Acquisition Company (SPAC), Fusion Acquisition Corp, raising USD 500 million in gross cash proceeds and valuing the company at USD 2.4 billion, post-money. 

In November 2021, MoneyLion acquired the content studio MALKA Media Group (MALKA) in a combined cash and equity deal of approximately USD 75 million. Through the acquisition, MoneyLion planned to leverage MALKA’s creator network to improve its customer engagement across digital channels by creating customized content that informs consumers’ financial decision-making and to drive customer growth by providing access to potential new customer segments. Further, MoneyLion also announced plans to acquire Even Financial (Even), an embedded finance marketplace, for up to USD 440 million in December 2021. Through the acquisition, MoneyLion was expected to leverage Even’s user base and partner network to expand its addressable market, distribution capabilities, and range of products. 

For the full year 2021, the company generated a total revenue of USD 171.1 million in FY2021, up 115% from the previous year. Net losses amounted to USD 164.9 million, having increased from USD 41.6 million in FY2020.

Segment:
Digital Banking - General (B2C)
Total funding:
USD 477.5 million
Competitors:
Chime, Varo, Aspiration, Current
Disruptor Funding History

Digital Banking - General (B2C):

MoneyLion
Dave
Douugh
Nubank
Chime
C6 Bank
N26
Revolut
Monzo
Starling Bank
Varo
Zopa
Atom Bank
Neon
Upgrade
Lunar
Allica Bank
bunq
KOHO
Lydia
Klar
Neo Financial
Vivid Money
Curve
Monese
Kroo
Point
HMBradley
Recognise Bank
Northmill Bank
Oxygen
Cogni

Digital Banking - Specialized (B2C):

Avant
Greenlight
Current
Aspiration
Step
Tandem
GoHenry
One
Zolve
MAJORITY
Greenwood
Copper
Pockit
Monument Bank
Good Money
Tomorrow
Empower
First Boulevard
Fair
pockid
Helios
Ando
Daylight
Cheese
Pennyworth

Digital Banking (B2B):

Nubank
C6 Bank
N26
Revolut
Brex
Monzo
Starling Bank
BlueVine
Atom Bank
Neon
Qonto
Lunar
Allica Bank
Juni
bunq
Tide Bank
Rho
Monese
Grasshopper
Mercury
Novo
ANNA
Lili
Nearside
Found
Recognise Bank
Oxygen
NorthOne
Countingup
Relay
Finom
Guava

Incumbents


Traditional banks are developing in-house products to offer digital-only services

Incumbents in the neobank space mainly consist of traditional banks and other financial institutions such as investment banks, which are increasingly focused on creating digital-only services to attract new market segments. While most disruptors have focused on serving the unmet needs of individual customers, incumbents appear to be equally invested in serving both individuals and businesses.

Many traditional banks, such as HSBC and Natwest, have focused on entering the neobank space by developing their own digital-only service offerings. Acquisitions and partnerships are a less common strategy among incumbents, although a few players such as Société Générale and American Express have entered the neobank space via acquisitions. 

Additionally, incumbents also comprise wealth management platforms such as Acorns and SoFi, which have ventured into the space by incorporating banking products such as checking and savings accounts into their wealth management offering. 

Digital Banking - General (B2C)
Digital Banking - Specialized (B2C)
Digital Banking (B2B)
Digital Lending (B2C)
Digital Lending (B2B)
In House Development
M&A
Partnership
Investment
PayPal
Goldman Sachs (Marcus)
American Express (Kabbage)
Remitly (Passbook)
JPMorgan
Orange (Orange Bank, Anytime)
Standard Chartered
HSBC
CaixaBank (ImaginBank)
Acorns
SoFi
Virgin Money
Marygold Companies
Walmart (Hazel by Walmart)
BBVA
Cogent Bank
Ageras
Société Générale (Shine)
M1 Finance
NatWest (Mettle)
UniCredit (BuddyBank)

Notable Investors


No investor data is available

Funding data are powered by Crunchbase
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