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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)
Wells Fargo
Apple
Walmart (Hazel by Walmart)
Virgin Money
Marygold Companies
H&R Block (Spruce)
SoFi
BBVA
UniCredit (BuddyBank)
Acorns
Sumitomo Mitsui Financial (Jenius Bank)
M1 Finance
Nubank
Chime
C6 Bank
N26
Revolut
Monzo
Starling Bank
Varo
Zopa
Atom Bank
Neon
Upgrade
Dave
MoneyLion
Lunar
bunq
KOHO
Lydia
Monese
Curve
BM Technologies
Stash Financial
Allica Bank
Klar
Neo Financial
Vivid Money
Point
HMBradley
Cogni
Recognise Bank
Northmill Bank
Oxygen
Douugh
Kroo
Juno
Zenus Bank
myTU
AltPay
FIBR
Vance
Marygold & Co
Ashman Bank
Remitly (Passbook)
Standard Chartered
CaixaBank (ImaginBank)
Avant
Greenlight
Step
Current
Aspiration
Tandem
GoHenry
Empower
MAJORITY
One
Zolve
Pockit
Monument Bank
Good Money
Fair
pockid
Greenwood
Alpian
Copper
Tomorrow
First Boulevard
Daylight
Helios
Ando
Fursure
Cheese
Pennyworth
WayaPay
KlaDot
Atmos Financial
American Express (Kabbage)
JPMorgan
Orange (Orange Bank, Anytime)
HSBC
Virgin Money
Société Générale (Shine)
Cogent Bank
Ageras
NatWest (Mettle)
Liberty Bank
Nubank
C6 Bank
N26
Revolut
Brex
Monzo
Starling Bank
Atom Bank
BlueVine
Neon
Qonto
Lunar
bunq
Monese
Tide Bank
Allica Bank
Rho
Arc Technologies
Novo
Grasshopper
Mercury
Oxbury Bank
NorthOne
Lili
Found
Nearside
ANNA
Recognise Bank
Oxygen
Countingup
Relay
Finom
Juni
Highbeam
myTU
AltPay
Pillar
Guava
BetaBank
Goldman Sachs (Marcus)
Orange (Orange Bank, Anytime)
Walmart (Hazel by Walmart)
CaixaBank (ImaginBank)
Virgin Money
SoFi
UniCredit (BuddyBank)
M1 Finance
Nubank
Avant
Revolut
Monzo
Varo
Lendbuzz
Zopa
Neon
Petal
Upgrade
Oportun
Dave
MoneyLion
Aspiration
Tandem
TomoCredit
BM Technologies
Stori
Klar
Neo Financial
Empower
Koyo
One
Zolve
HMBradley
Kikoff
Monument Bank
Northmill Bank
Kroo
Inclined Technologies
Keebo
Fiinu
X1
American Express (Kabbage)
HSBC
Virgin Money
Société Générale (Shine)
Liberty Bank
Nubank
Brex
Monzo
Starling Bank
Atom Bank
BlueVine
Neon
Moneyflow
Rho
Arc Technologies
Denim
Grasshopper
Oxbury Bank
Nearside
Banca AideXa
Good Money
Recognise Bank
Lemonero
DBT
Juni
Highbeam
FIBR
BetaBank
Ashman Bank

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
Nubank
Public - Market cap USD 20.2 bn
MoneyLion
Public - Market cap USD 207.9 mn
Dave
Public - Market cap USD 155.0 mn
BM Technologies
Public - Market cap USD 65.2 mn
Douugh
Public - Market cap USD 11.7 mn
Chime
2293
C6 Bank
2290
N26
1719
Revolut
1711
Monzo
1123
Starling Bank
1086
Varo
992
Zopa
792
Atom Bank
778
Neon
720
Upgrade
587
Stash Financial
480
Lunar
448
Allica Bank
282
bunq
281
KOHO
279
Lydia
263
Klar
258
Neo Financial
236
Monese
205
Vivid Money
205
Curve
183
Kroo
72
Point
59
HMBradley
52
Recognise Bank
30
Northmill Bank
30
Oxygen
25
Juno
21
Zenus Bank
14
Watchlist
?
Cogni
myTU
Vance
Marygold & Co
AltPay
FIBR
Ashman Bank

Digital Banking - Specialized (B2C)

?

Disruptors

?
Funding in USD Millions
Avant
1829
Greenlight
557
Step
491
Current
402
Aspiration
250
Tandem
176
Empower
175
GoHenry
121
Greenwood
88
MAJORITY
84
One
66
Zolve
55
Alpian
51
Copper
42
Pockit
40
Monument Bank
39
Good Money
39
Tomorrow
29
First Boulevard
20
Fair
20
pockid
5
Watchlist
?
Daylight
Helios
Ando
Fursure
Cheese
Pennyworth
Atmos Financial
WayaPay
KlaDot

Digital Banking (B2B)

?

Disruptors

?
Funding in USD Millions
Nubank
Public - Market cap USD 20.2 bn
C6 Bank
2290
N26
1719
Revolut
1711
Brex
1457
Monzo
1123
Starling Bank
1086
Atom Bank
778
BlueVine
769
Neon
720
Qonto
709
Lunar
448
Allica Bank
282
Juni
282
bunq
281
Monese
205
Tide Bank
195
Rho
195
Arc Technologies
181
Novo
171
Grasshopper
162
Mercury
152
Oxbury Bank
121
NorthOne
90
Lili
80
Found
75
Nearside
73
ANNA
69
Recognise Bank
30
Oxygen
25
Countingup
21
Relay
19
Finom
19
Watchlist
?
Highbeam
myTU
Guava
AltPay
BetaBank
Pillar

Digital Lending (B2C)

?

Disruptors

?
Funding in USD Millions
Nubank
Public - Market cap USD 20.2 bn
MoneyLion
Public - Market cap USD 207.9 mn
Dave
Public - Market cap USD 155.0 mn
BM Technologies
Public - Market cap USD 65.2 mn
Fiinu
Public - Market cap USD 51.0 mn
Avant
1829
Revolut
1711
Monzo
1123
Varo
992
Lendbuzz
894
Zopa
792
Neon
720
Petal
705
Upgrade
587
Oportun
566
Stori
400
Klar
258
Aspiration
250
Neo Financial
236
Tandem
176
Empower
175
TomoCredit
139
Koyo
130
Kroo
72
One
66
Zolve
55
HMBradley
52
X1
47
Kikoff
43
Monument Bank
39
Northmill Bank
30
Inclined Technologies
19
Watchlist
?
Keebo

Digital Lending (B2B)

?

Disruptors

?
Funding in USD Millions
Nubank
Public - Market cap USD 20.2 bn
Brex
1457
Monzo
1123
Starling Bank
1086
Atom Bank
778
BlueVine
769
Neon
720
DBT
286
Juni
282
Moneyflow
249
Rho
195
Arc Technologies
181
Denim
165
Grasshopper
162
Oxbury Bank
121
Nearside
73
Banca AideXa
53
Good Money
39
Recognise Bank
30
Lemonero
14
Watchlist
?
Highbeam
FIBR
Ashman Bank
BetaBank

Nubank

Brazil-based Nubank offers banking products and services via a web portal and a mobile app, with the application process being done entirely online. It also offers in-app shopping at retailers such as AliExpress, Dafiti, and Magalu. The company serves both B2C and B2B segments and operates in Brazil, Mexico, Colombia, and Argentina. The company initially entered the neobanking space in 2014 by offering credit cards and focused on providing it at low interest rates, compared to established banks. Since then, the company has grown to offer the full spectrum of banking services, which includes checking accounts, debit cards (with ATM access), credit cards (with credit limits as low as USD 10 per month), and loans, following the receipt of its own banking license in Brazil in 2017. Checking accounts and debit cards are offered free of charge, and the company therefore solely generates income from these accounts from ATM and interchange fees.

In addition to its banking products, the company also offers life and mobile insurance products and Peer to Peer (P2P) payment options via Pix (a payment platform introduced by Brazil’s Central Bank). The company also offers a rewards program that enables customers to earn and redeem points at selected merchants. 

Nubank also provides a trading app–NuInvest–through which its Brazilian customers can trade stocks and cryptocurrency, with the company charging ~0.02% per transaction. Additionally, the company plans to launch its own cryptocurrency –Nucoin–as part of its new rewards program in the first half of 2023. The token will be distributed free of charge to customers and is built on the layer-2 scaling network Polygon .

The company has expanded its presence to Colombia and Mexico, although products offered in these two markets remained limited to credit cards as of April 2022. In July 2022, Nubank applied to the Colombian regulator for a license to form a financial company as part of its strategic plan to become a leading digital financial service provider in the country.

Key customers and partnerships

In September 2021, the company further expanded its loan offering by partnering with Creditas, a lending platform in Brazil, through which Creditas would offer loans to Nubank customers. As of September 2022, the company had around 70.4 million customers, of which 57.4 million (or 81.5%) were monthly active customers.

Funding and financials

In January 2021, Nubank raised USD 400 million in Series G funding led by GIC, Whale Rock, and Invesco. In June 2021, the company announced an extension of USD 750 million to its Series G round led by Berkshire Hathaway, bringing the total raised in this round to USD 1.15 billion and valuing the company at USD 30 billion. Nubank has planned to use the funding to expand its product offering in Brazil while growing its operational presence in its overseas markets.

In December 2021, Nubank was listed on the New York Stock Exchange (NYSE) under the trading symbol NJ, raising nearly USD 2.6 billion, at a valuation of USD 41.5 billion, making it the most valuable listed financial institution in South America. The fresh funds were expected to be funneled into Nubank’s expansion into Mexico and Colombia.

For the full year 2021, the company generated a total revenue of USD 1.7 billion, more than doubling from FY2020, and incurred an operating loss of USD 165.3 million.

Segment:
Digital Banking - General (B2C)
Total funding:
USD 3.9 billion
Competitors:
N26, C6 Bank
Disruptor Funding History

Digital Banking - General (B2C):

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

Digital Banking - Specialized (B2C):

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

Digital Banking (B2B):

Nubank
C6 Bank
N26
Revolut
Brex
Monzo
Starling Bank
Atom Bank
BlueVine
Neon
Qonto
Lunar
Allica Bank
Juni
bunq
Monese
Tide Bank
Rho
Arc Technologies
Novo
Grasshopper
Mercury
Oxbury Bank
NorthOne
Lili
Found
Nearside
ANNA
Recognise Bank
Oxygen
Countingup
Relay
Finom
Highbeam
myTU
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)
JPMorgan
Remitly (Passbook)
Orange (Orange Bank, Anytime)
Standard Chartered
HSBC
Wells Fargo
Apple
Walmart (Hazel by Walmart)
CaixaBank (ImaginBank)
Virgin Money
Marygold Companies
SoFi
Société Générale (Shine)
BBVA
Cogent Bank
Ageras
UniCredit (BuddyBank)
Acorns
Sumitomo Mitsui Financial (Jenius Bank)
NatWest (Mettle)
M1 Finance
Liberty Bank

Notable Investors


No investor data is available

Funding data are powered by Crunchbase
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