Free debit cards, digitised account opening, personal finance advisory, instant payments, and many more features prompt retail customers and SMEs to choose neobanks over legacy institutions

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Digital account opening is surging this year. The rising demand for convenience among bank customers calls for flexible remote solutions. Neobanks are benefiting from the trend since they provide frictionless onboarding and transaction experiences.

Free debit cards, digitised account opening, personal finance advisory, instant payments, e-bill generation, invoice management, and many more features prompt retail customers and SMEs to choose neobanks over traditional financial institutions.

The global neobanking market size was valued at $47.39 billion in 2021. It is expected to grow at a compound annual growth rate (CAGR) of 53.4% from 2022 to 2030.

Before identifying the leading digital-only institutions, let’s explore what neobanks are in the nutshell.

What a neobank is

Neobank, aka challenger bank, is a digital-only financial institution that provides typical banking services online without any physical branches. Neobanks may be both full-stack and front-end focused.

While full-stack neobanks have banking licences to operate independently, front-end ones are third-party providers cooperating with legacy financial institutions to provide banking services. The cooperation is beneficial to both sides since traditional banks may leverage the neobank’s technology without investing in costly in-house solutions.

Consumers today show increased demand for digital offerings due to their speed, convenience and low cost. In addition, neobanks may provide innovative services often not available at traditional institutions. For instance, challengers may offer early wage access, generous cashback programs, BNPL, fee-free overdrafts, zero-interest short-term loans, crypto trading, higher than typical interest rates for saving accounts, etc.

Neobank market size

According to Insider Intelligence, the U.S. has one of the highest number of digital-only bank account holders globally. At the beginning of 2022, it stood at 29.8 million. The number is expected to grow to 47.8 million by 2024.

The global neobanking market size is expected to reach $66.82 billion in 2022. It will presumably grow at a compound annual growth rate (CAGR) of 53.4% from 2022 to 2030.

Currently, there are over 400 neobanks in the world. A recent report estimated that challengers held one billion accounts around the world. This number includes 100 million accounts in the U.S, while in Brazil, half the population has an account with a neobank.

Competition in the industry is increasing as big banks provide more efficient digital offerings. However, a few household names still manage to attract customers and generate significant profits.

Top Neobanks in the U.S.

These are the top most popular US digital-only banks, judging by market account holders:

• Chime (13.1 million)

• Current (4.0 million)

• Aspiration (3.0 million)

• Varo (2.7 million)

Top Neobanks in the UK

These are some of the top British digital-only banks, ranked by account holders:

• Monzo (5.8 million)

• Revolut (4.8 million in the UK, 20 million globally)

• Starling (1.9 million)

• Monese (1.8 million)

Top Neobanks in the EU

• Revolut (20 million)

• Bunq (5.4 million)

• N26 (8 million)

• Fineco Bank (1.4 million)

• Tomorrow (90,000)

Most valued neobanks globally

The most successful neobanks receive generous funding too. Statista estimated the valuations of independent neobanks worldwide. Here are the top 10 neobanks from across the globe, ranked by market cap:

• NuBank (Brazil) – $45 billion

• Revolut (UK) – $33 billion

• Chime (US) – $25 billion

• Tinkoff Bank (Russia) – $21 billion

• SoFi (US) – $12 billion

• N26 (Germany) – $9 billion

• Upgrade (US) – $6 billion

• OakNorth (UK) – $5 billion

• Monzo (UK) – $4,5 billion

• Dave (US) – $4 billion

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