Neobanking Market Analysis

Neobanking Market Analysis

In the UK, the business account segment dominated more than 65% of the neobanking market share in 2021 led by the gradual shift of enterprise clientele toward neobanks for bulk payout services. Neobanks have strategically aligned their business account features with the needs of SME and enterprise end-users, incorporating services such as instant credit limits, detailed account insights, and international transfers.
 

The growing need for reduced complexity in banking operations is driving the business account segment growth. Traditional banks have multiple rivals and multiple portals, which are often inconvenient for corporates with multiple banking relationships. Neobanking services reduce the complexity of managing cash and transactions across multiple bank relationships.
 

In the U.S., payment & money transfer services are poised to reach USD 45 billion by 2028. Digital payments are predicted to witness a customer-led revolution as rising penetration of smartphones and increasing use of neobanking apps have triggered the growth of the segment.
 

The U.S. mobile commerce industry is expanding rapidly and presenting SME with an ever-increasing opportunity to tap into the new revenue streams. It is expected that nearly 35% share of the overall e-commerce market is through mobiles, powered by rising smartphone usage amongst older demographics and high usage among the 18- to 24-year-old age group, where smartphones enjoy a 93% penetration. Increasing presence of small to mid-size vendors on neobanking platforms will provide lucrative industry growth opportunities.
 

In Japan, the enterprise application segment is anticipated to showcase 50% growth rate through 2028. The advent of neobanking model across the region, which leverages the use of digital technology and is aimed at meeting the evolving needs of enterprise customers, is providing stiff completion to traditional market players. Several foreign neo banks, such as Revolut and Wise, have approached the Japan market, which has further buoyed the industry expansion of the segment.
 

The Japanese government has set a target of doubling its cashless transactions defined as credit cards, debit cards, and e-money to 40% of transactions by 2027. This is part of its “Society 5.0” future investment strategy. The government considers that going cashless would save banks about USD 9.4 billion a year, which is slated to provide lucrative growth opportunities for neobanking companies.
 

Europe neobanking market is estimated to attain a CAGR of 45% till 2028 owing to the adoption of an omnichannel strategy by neobanks to meet various customer needs. Digital channels have strong penetration in the region with both individual & corporate customers, impelling the industry progression.
 

Hefty investments in financial technologies in the region are fueling digitization and fostering the regional growth. For instance, total investments in financial technology across France, Germany, and the UK rose to USD 15 billion in 2021, compared to USD 5 billion in 2020. The European Union was an early mover in updating its Payment Systems Directive, ushering innovation-friendly regulatory frameworks that helped the development of neobanking services across the regional market.