NEW YORK--(BUSINESS WIRE)--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 one 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 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."
The following key developments will reshape Neobanking in the years ahead:
- Globally, 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.
- Globally, innovation speedboats launched as a venture by a larger financial services group or incumbent bank, now account for one out of every three new Neobank launch.
- In the US, Neobanks serve more than 100 million retail banking clients accounts.
- Simon-Kucher estimates, less than a handful of the 85 Neobanks in the US are breaking even. Several are in the cash burn zone losing as much as $140 per customer annually.
More information is available here.