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European neobanks are back

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. Though similar to traditional banks, they only offer their services through websites and mobile apps, allowing them to operate without a brick-and-mortar presence. Neobanks also provide additional services such as access to investment platforms, personal finance management (PFM) tools, and financial education tools.
Types of neobanks:
  • Full-stack model: These banks have obtained digital banking licenses, which allow them to offer a broad range of services spanning digital banking and lending segments. They typically create their banking software from scratch to provide a more comprehensive suite of products.
  • Partnership model: These banks do not have their own banking licenses. They partner with traditional banks to offer services and products under their partnering bank’s license, which is generally issued for specific product types, creating a need to obtain multiple licenses to expand into new product verticals. These banks typically lack the resources to create infrastructure and rely on third-party infrastructure companies (including BaaS, LaaS, payments solutions, and fraud prevention platforms)
Below, we present a detailed company teardown published by our content partner, Sacra, (March 2024) taking a deeper look at the industry’s market leaders and revenues.

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