Global Neo Banking Market Grows Tremendously at a CAGR of 47.3%

Introduction

Neo-banking signifies a paradigmatic change within the financial services sector, marked by the rise of digitally-oriented financial service providers prioritizing technology-driven approaches. Neo-banks provide consumers with exceptional convenience by facilitating the opening of accounts, management of funds, and execution of transactions only through user-friendly mobile applications or web interfaces. In contrast to conventional banking institutions, neo-banks exclusively function within the digital domain, devoid of physical branches, and instead prioritize establishing a virtual presence.

Market Dynamics

Innovation and Personalization Drive the Global Market

Neo-banks employ data analytics and machine learning algorithms to extract valuable insights from their customers' data. The analysis of transaction history, spending patterns, and other financial activities is conducted in order to gain a comprehensive understanding of each customer's financial status. By leveraging sophisticated algorithms, neo-banks are capable of offering tailored product suggestions. For instance, financial advisors have the ability to propose particular savings or investment alternatives that align with an individual's financial objectives and their capacity to tolerate risk. Such factors drive market growth.

Increasing Demand for Digital Banking Solutions Creates Tremendous Opportunities

Neo-banks have the potential to penetrate and capitalize on numerous emerging markets and locations characterized by inadequate banking infrastructure, thereby accessing a considerable untapped market. These regions frequently experience limited availability of conventional banking services, rendering them susceptible to digital banking solutions. Neo-banks can penetrate these sectors without the need for costly physical branch networks. Instead, they may utilize mobile applications and internet platforms to target a wider range of customers.

Neo-banks possess the capacity to facilitate financial inclusion through the provision of services to populations that were previously excluded from or had limited access to traditional banking services. Neo-banks have the potential to provide crucial financial services, including digital wallets, payments, and savings accounts, in areas where traditional banking options are scarce. This can lead to the creation of economic prospects in the foreseeable future.

Regional Insights

Europe is the most significant shareholder in the global neo-banking market and is predicted to expand significantly during the forecast period. Neo banks, sometimes known as digital disruptors or "challenger banks" in the United Kingdom, are financial firms that only operate online. It rose to prominence after the global financial crisis of 2007–2009. The Netherlands has a welcoming and proactive regulatory framework for neo-banking, letting them operate under a European banking license or an electronic money institution (EMI) license. The European banking license allows neo-banks to provide full-service banking across the European Union (EU).

In contrast, the EMI license allows neo-banks to provide payment services and electronically store money. Fintech expansion in Europe has been aided by regulatory frameworks such as PSD2 (Payment Services Directive 2) and the European Banking Authority (EBA). These regulations support open banking and financial sector competition. Over USD 10 billion was invested in European fintech businesses concentrating on digital banking, payments, and blockchain technologies.

Key Highlights

• The global neo banking market size was valued at USD 71.39 billion in 2022. It is estimated to reach USD 3,350 billion by 2031, growing at a CAGR of 47.3% during the forecast period (2023–2031).
• Based on the service offerings, the global neo-banking market is divided into digital checking and savings accounts, payment services and money transfers, investment and wealth management, lending and credit services, and insurance services. The lending and credit services segment is the largest contributor to the market share and is expected to grow at a significant rate during the forecast period.
• Based on type, the global neo-banking market is divided into neo-banks with banking licenses, non-bank fintech collaborating with banks, and vertical-specific neo-banks.The non-bank fintech collaborating with banks segment owns the largest market share and is anticipated to grow significantly during the forecast period.
• Based on customer type, the global neo banking market is divided into small and medium-sized enterprises (SMEs).The small and medium-sized enterprises (SMEs) segment dominates the global market and is expected to grow at a significant rate during the forecast period.
• Europe is the most significant shareholder in the global neo-banking market and is predicted to expand significantly during the forecast period.

Competitive Players

1. Revolut,
2. Chime
3. Monzo
4. N26 AG
5. Starling Bank
6. Bunq
7. Tandem Bank
8. Atom Bank
9. Hello Bank!
10. Fidor Bank
11. Cleo
12. Yapeal
13. Neon
14. Vialet
15. WeBank
16. Nubank
17. Jupiter

Recent Developments

Recent Developments

• April 2023- The Reserve Bank of India (RBI) issued neobanking startup Jupiter with an NBFC license, allowing it to extend loans to its customers.

Segmentation

1. By Service Offerings
   1. Digital Checking and Savings Accounts
   2. Payment Services and Money Transfers
   3. Investment and Wealth Management
   4. Lending and Credit Services
   5. Insurance Services
2. By Type
   1. Neo-Banks with Banking Licenses
   2. Non-Bank FinTech Collaborating with Banks
   3. Vertical-Specific Neo-Banks 
3. By Customer Type
   1. Retail Customers
   2. Small and Medium-sized Enterprises (SMEs)
   3. Freelancers and Gig Economy Workers
   4. Corporate Clients