From the monthly archives: "January 2021"
  • The global neobank market: From 100 to 300 neobanks in 3 years (2017 to 2020). Makes a new neobank every week.
  • US-based neobank Chime tops the global valuation list with a price-tag of $14.5bn, while Brazil’s Nubank tops the leaderboard for the most customers, claiming to have 30m users.
  • 2021 will potentially be the first neobank IPO year, starting with South Corea’s Kakao Bank that has attracted $2.5bn in investment to date.

Source: The global boom in digital banks: What the data tells us
Presentation: Financial Services 2020, Exton Consulting

“The High Street has been replaced by Amazon. The analogy is, what’s happened in banking is that the High Street banks have been replaced by the digital banks.”

Anne Boden, CEO of Starling Bank, December 2020

What is a neobank or challenger bank?

Other terms: digital bank, online bank, internet-only bank or virtual bank 

Some definitions:

  • type of direct bank that operates exclusively online without traditional physical branch networks
  • digital startup challengers that deliver banking products outside the traditional system
  • neobanks focus on great customer experience with easy onboarding processes (KYC), comprehensive account and transactions views, mobile payment and budgeting tools. They often aggregate different third-party services via APIs into one seamlessly integrated front-end
  • Not all so-called neobanks have a full banking licence. In Western countries, there are three stages of these new competitors:

First digital banks to vanish from the market again

During 2020, the first challenger banks closed down again (examples: Bó in UK and Xinja in Australia), partly also due to the covid-19 pandemic.

Simple – the first neobank ever, founded in 2009 in New York and then acquired by BBVA USA in 2014 (for $117 million or about $1200 per customer) has informed its customers in January 2021 that Simple will be ceasing operations in 2021; the accounts will be transitioned to BBVA USA. This strategic decision was made as a result of the merger between BBVA USA and PNC Financial Services Group.

2021 – the year of consolidation in neobanking?

Will 2021 be the year of consolidation in neobanking? After 5 – 6 years of explosive emergence of a new sector with a multitude of new competitors, consolidation sets in.