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Neobanking Market size exceeded USD 45 billion in 2021 and is anticipated to grow at a CAGR of over 45% from 2022 to 2028. The market growth is attributed to the sophisticated digital advisory services offered by such banks. By 2021, neobanks were offering around ten features on average compared to only four functions provided by traditional banks. These four features, search, view balances, view transactions, and customize notifications, only provide basic insights for users, which has initiated a seismic consumer behavior change toward neobanking services.
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Although COVID-19 has taken a toll on the global economy, it has catalyzed the digital transformation of various industries. The market is amongst the many business models that flourished during COVID-19. The need to embrace neobanks became more urgent than ever as they successfully solved the practical problems of traditional banking (physical branch visits, long queues, and handling cash) in the wake of the pandemic. Several end-use markets have witnessed an uptick in neobanking engagement due to increased acceptance during the lockdown. These include both enterprise and personal consumers.
|Market Size in 2021:||USD 45 Billion|
|Forecast Period:||2022 to 2028|
|Forecast Period 2022 to 2028 CAGR:||45%|
|2028 Value Projection:||USD 600 Billion|
|Historical Data for:||2018 to 2020|
|No. of Pages:||260|
|Tables, Charts & Figures:||293|
|Segments covered:||Account Type, Service, Application and Region|
|Pitfalls & Challenges:|
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In the UK, the business account segment dominated more than 65% of the neobanking market share in 2021 led by the gradual shift of enterprise clientele toward neobanks for bulk payout services. Neobanks have strategically aligned their business account features with the needs of SMEs and enterprise end-users, incorporating services such as instant credit limits, detailed account insights, and international transfers.
The growing need for reduced complexity in banking operations is driving the business account segment growth. Traditional banks have multiple rivals and multiple portals, which are often inconvenient for corporates with multiple banking relationships. Neobanking services reduce the complexity of managing cash and transactions across multiple bank relationships.
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In the U.S., payment & money transfer services are poised to reach USD 45 billion by 2028. Digital payments are predicted to witness a customer-led revolution as rising penetration of smartphones and increasing use of neobanking apps have triggered the growth of the segment.
The U.S. mobile commerce industry is expanding rapidly and presenting SMEs with an ever-increasing opportunity to tap into the new revenue streams. It is expected that nearly 35% share of the overall e-commerce market is through mobiles, powered by rising smartphone usage amongst older demographics and high usage among the 18- to 24-year-old age group, where smartphones enjoy a 93% penetration. Increasing presence of small to mid-size vendors on neobanking platforms will provide lucrative industry growth opportunities.
In Japan, the enterprise application segment is anticipated to showcase 50% growth rate through 2028. The advent of neobanking model across the region, which leverages the use of digital technology and is aimed at meeting the evolving needs of enterprise customers, is providing stiff completion to traditional market players. Several foreign neo banks, such as Revolut and Wise, have approached the Japan market, which has further buoyed the industry expansion of the segment.
The Japanese government has set a target of doubling its cashless transactions defined as credit cards, debit cards, and e-money to 40% of transactions by 2027. This is part of its “Society 5.0” future investment strategy. The government considers that going cashless would save banks about USD 9.4 billion a year, which is slated to provide lucrative growth opportunities for neobanking companies.
Europe neobanking market is estimated to attain a CAGR of 45% till 2028 owing to the adoption of an omnichannel strategy by neobanks to meet various customer needs. Digital channels have strong penetration in the region with both individual & corporate customers, impelling the industry progression.
Hefty investments in financial technologies in the region are fueling digitization and fostering the regional growth. For instance, total investments in financial technology across France, Germany, and the UK rose to USD 15 billion in 2021, compared to USD 5 billion in 2020. The European Union was an early mover in updating its Payment Systems Directive, ushering innovation-friendly regulatory frameworks that helped the development of neobanking services across the regional market.
Some of the key companies functioning in the market include Atom Bank Plc, BBVA S.A., BMTX, Inc., Chime Financial, Inc., Citigroup Inc., Dave, Inc., Deutsche Bank AG, Digibank (DBS Bank Ltd.), Equitable Bank, HSBC Holdings Plc, Monzo Bank Ltd., N26 GmbH, Neo Financial Technologies Inc, Nubank S.A., OakNorth, Orange Bank, OTP Bank Group, Paytm Payments Bank, Revolut Ltd., SoFi Technologies, Inc., Sopra Steria Group, Starling Bank, Tangerine Bank, Tinkoff Bank, and Upgrade, Inc.
The neobanking market is analyzed to be highly competitive due to the presence of both multinational companies and fintech start-ups in the space. These market participants are mainly focusing on collaboration with banking institutes to gain revenue share. Prominent leaders operating in the market are placing an ever-growing emphasis on delivering advanced digital banking solutions that can cater to the dynamic requirements, especially during the rise of AI-enabled automation amid the ongoing pandemic.
The market has also witnessed several strategic alliances between key players to launch new products with added functionalities and maintain revenue share & profitability such as the June 2020 collaboration of N26 with TransferWise to co-develop a neobanking infrastructure for rapid provisioning of foreign currency transfer services.
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Market, By Account Type
Market, By Service
Market, By Application
The above information has been provided for the following regions and countries: