Global Neo and Challenger Bank Market Size is Estimated to Reach USD 1561 Billion by 2030, Growing at a CAGR of 48.3%: Straits Research

The main market-driving reasons include higher interest rates offered to consumers compared to traditional banks, government & regulatory backing for banking activities, and superior convenience provided by mobile applications.

New York, United States, Dec. 20, 2023 (GLOBE NEWSWIRE) — Neo banks are digital-only banks without physical branches that operate in the market under a partnered bank license. These banks exclusively offer digital and mobile-first financial payment solutions, remittances & money transfers, lending, checking & savings accounts, insurance, and mortgages via mobile applications. In addition, neobanks offer value-added services such as automated accounting, cost management, and payroll, particularly to expanding small and medium-sized businesses. Challenger banks are established firms with full banking licenses in the market. These banks provide services such as lending, investments & savings accounts, checking & merchant accounts, mobile banking, credit cards, mobile banking, and others (retirement savings, insurance products, and buying & selling of cryptocurrency). These banks are continuously challenging existing traditional banks by innovating & integrating several technologies in their product offerings. Together, neo and challenger banks have entered the banking industry with advanced features, real-time services, and client-centric products & services, posing challenges for existing traditional banks in the market.

Significant market drivers include higher interest rates offered to customers than traditional banks, government and regulatory backing for banking activities, and greater convenience afforded by mobile applications. In addition, the market for neo and challenger banks is anticipated to offer profitable opportunities, such as expanding their businesses by enhancing their online offerings to the unbanked population in emerging economies.

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Convenience Offered to Consumers to Drive the Global Neo and Challenger Bank Market

Neobanks and challenger banks provide consumers with mobile applications for highly efficient digital platforms. These banks offer real-time account opening, balance checks, payments, money tracking tools, and advanced chatbot services 24 hours a day, seven days a week. In addition, to fulfill the demands of hyper-connected and well-informed clients, these banks are boosting their investments in digital capabilities and building customer service models to give immediate and personalized services in the market. In addition, the customer-centric approach, lower cost structure, and hyper-personal experiences offered by these banks are anticipated to drive the growth of the global market over the forecast period.

Increase in Penetration of Smartphones and Internet to Provide Opportunities for the Global Neo and Challenger Bank Market

According to Straits Research, “The global neo and challenger bank market size was valued at USD 45 billion in 2021 and is projected to reach USD 1561 billion by 2030, registering a CAGR of 48.3%during the forecast period (2022 – 2030).” The market expansion for neo and challenger banks is anticipated to be positively impacted by an increase in smartphone usage, which is expected to create enormous potential opportunities. With the growth in internet usage and the convenience of accessing financial services, consumers are seeking greater product transparency and customization via mobile applications. To meet the rising demands of millennials, Gen Z, and baby boomers, the financial infrastructure is being expanded to deliver quick and inexpensive services, boosting the market’s product offers. In addition, digital-only banks are anticipated to aid in business expansion, the development of existing banking portfolios, the bundling of product offers, and the provision of market-specific solutions.

For example, N26, a German challenger bank, increased its operations in the U.S. in 2019 due to increased customer attitudes and preferences about online banking and a considerable increase in smartphone usage. During the forecast period, the global market is predicted to benefit from the cumulative effect of these variables.

Key Highlights

  • In terms of service type, the global neo and challenger bank market is classified into loans, mobile banking, checking & savings account, payment & money transfer, and others. The loans segment was the highest contributor to the market and is estimated to grow at a CAGR of 46.7% during the forecast period.
  • By end user, the global neo and challenger bank market is bifurcated into business and personal. The business segment was the highest contributor to the market and is estimated to grow at a CAGR of 46.9% during the forecast period.

Regional Insights

Region-wise, the global neo and challenger bank market is analyzed across North America, Europe, Asia-Pacific, and LAMEA. Europe was the highest revenue contributor and is estimated to grow at a CAGR of 47.5% during the forecast period. The European market is evaluated for the United Kingdom, Germany, France, and the rest of Europe. Due to innovative laws implemented under neo and challenger banks to foster competition and break up the European banking monopoly, the European region has experienced substantial growth. The key players in the region are challenger banks such as Atom Bank, Tandem Bank, Monzo, Starling Bank, Revolut, and N26. In addition, these banks are enhancing the user experience, usability, accessibility, and innovative functionality of their mobile applications, increasing their popularity among European consumers and propelling the global market expansion. In addition, these FinTech companies offer advanced banking solutions that include the ability to lock bank cards temporarily, graphic summaries of spending activities, and other alert messages. As a result, digital challenger banks in Europe have experienced substantial growth. Furthermore, numerous financial and progressive regulators are ensuring the viability of neo and challenger banks by making obtaining a financial license easier and obligatory. This has been a significant element in expanding digital-only banks throughout the region.

Asia-Pacific is the second largest region. It is projected to grow at a CAGR of 48.3%during the forecast period. Neobanks that provide fully digitalized financial services are gaining popularity in Asia-Pacific. In addition, an increase in urbanization and a movement in consumer preference toward digital-only banking services contribute considerably to the expansion of the Asia-Pacific market for neo and challenger banks. Moreover, FinTech organizations from Australia, Hong Kong, Japan, Malaysia, the Philippines, Singapore, Taiwan, and Thailand have created the Asia-Pacific Fintech Network to facilitate collaboration and promote innovation among the region’s neo and challenger banks. As a result, this has become a significant market growth trend.

Competitive Landscape

The key players in the global neo and challenger bank market analysis are Atom Bank plc, Fidor Solutions AG, Monzo Bank Limited, Movencorp, Inc., MYbank, Number26 GmbH, Simple Finance Technology Corporation, Tandem Bank, UBank limited, and WeBank.

Market News

  • September 2022 – The online bank has announced today that all customers with a Spanish IBAN (1) can now send, receive and request money through the popular mobile payments solution. In addition, the online bank’s app will incorporate the Bizum functionality to pay at partner merchants in early October. Thus, N26 becomes the first neobank to integrate Bizum into its payment methods and continues to expand its range of services and functionalities to offer the best banking experience.
  • May 2022 – Australia’s first digital bank, UBank, has today revealed a new look and feel after merging with smart bank, 86 400 – becoming one team under a single brand, ubank.

Global Neo and Challenger Bank Market: Segmentation

By Service Type

  • Loans
  • Mobile Banking
  • Checking & saving accounts
  • Payment & money transfer
  • Others

By End User

  • Business
  • Personal

By Region

  • North America
  • Europe
  • Asia-Pacific

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About Straits Research Pvt. Ltd.

Straits Research is a market intelligence company providing global business information reports and services. Our exclusive blend of quantitative forecasting and trends analysis provides forward-looking insight for thousands of decision-makers. Straits Research Pvt. Ltd. provides actionable market research data, especially designed and presented for decision making and ROI.

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