White paper reveals only five percent of Neobanks are breaking even, with most earning less than 30 US dollars in revenues per customer per year
London, 26th May – Simon-Kucher & Partners, a global strategy and marketing consultancy, today released its Global Neobanking Radar* to track and rank Neobanks around the world based on their potential for sustainable growth. Alongside this, Simon-Kucher also released a white paper on "The Future of Neobanking: How can Neobanks Unlock Profitable Growth," examining the current state of the industry and its path to profitability.
Neobanks entered the banking scene a decade ago as mobile-focused challenger banks are looking to establish primary, digital-only relationships with digitally savvy clients. Simon-Kucher estimates there are currently close to 400 Neobanks around the world, together serving nearly 1 billion client accounts. However, despite their lofty valuations only five percent of these challenger banks have managed to reach a breakeven point, according to Simon-Kucher analysis. Even for the most renowned challenger banks this is the case. An analysis of 25 of the largest Neobanks in the world found only two have reached profitability, and that a majority of them earn less than 30 US dollars in annual revenues per customer.
"Moving from 'get reach' to 'get rich' requires a dramatic mindset shift that can be difficult to orchestrate," said Christoph Stegmeier, Senior Partner at Simon-Kucher. "Yet it is critical that these digital disruptors make that leap especially as they approach their sixth and seventh year in operation. The risk of failure rises exponentially at that point if the business is not even breaking even."
Based on analysis of data from the Simon-Kucher Global Neobanking Radar, the following key developments will reshape Neobanking in the years ahead:
- The number of Neobank launches has declined from its peak in 2020 when 94 new Neobanks entered the marketplace; in 2021 the global market saw 59 new Neobanks.
- Innovation speedboats or digital-only banks launched as a venture by a larger financial services group or incumbent bank, now account for one out of every three new Neobank launch. This trend is expected to accelerate as incumbents seek ways to reach new markets and segments.
The Future of Neobanking white paper examining Neobanks and their path to profitability is available upon request.
*About the Simon-Kucher Global Neobanking Radar: This proprietary database tracks and ranks Neobanks around the world based on several factors including level of activity, funding, and valuations. Currently there are close to 400 Neobanks in the world, together serving close to 1 billion client accounts including individuals, and small-and-medium sized businesses.
Simon-Kucher & Partners, Strategy & Marketing Consultants:
Simon-Kucher & Partners is a global consulting firm specializing in TopLine Power®. We help our clients achieve growth and profit targets by applying practical, evidence-based strategies. Simon-Kucher & Partners is regarded as the world’s leading pricing advisor and thought leader. The consultancy has more than 1,700 employees in 42 offices worldwide.