The shift in user demand towards digital banks has challenged the status quo of traditional banks as the former disrupt the finance industry with the personalized customer experience and unique product offerings.
Read more: Neobanks: Everything You Need to Know
For the past 7 years, the neo-banking revolution has been largely centered in Europe, with some of the first mobile-centric examples seeing the light of day in the UK, France, Finland, Germany, or Russia. Unlike that time, neo-banking is now a truly global phenomenon and the industry of players is spreading all over the world with increasingly complete coverage of segments and banking models in the markets of the Asia-Pacific region and America. According to Statista, the number of users in the Neobanking segment is expected to amount to 128.26m users by 2025.
As the sustainable development digital process evolves, Europe remains a hotspot of neobanks. Currently, about 30% of neobanks worldwide are located there. Today, Finescanner would like to bring you five innovative neobanks that have all the favorable prerequisites to remain at the forefront of the market in the near future.
Revolut Ltd is a fintech company founded in 2014 that currently operates in 35+ countries. Starting as a money transfer service, it has expanded further and become one of the most popular neobanks in the world. Today, it provides 18 million users with banking services including accounts with IBAN, prepaid MasterCard or VISA debit card, commission-free currency exchange, stock trading, cryptocurrency exchange, and peer-to-peer payments.
With a valuation of $33 billion, it was granted a full banking license by the European Central Bank, allowing it to issue consumer credit in more than 15 European countries. At the same time, to become a full-fledged bank in its homeland (UK), Revolut has applied for a banking license in the UK to upgrade its electronic money institution license, which is expected to be issued sometime this year. Also among the latest news, fintech has entered a new business vertical - insurtech.
Monzo Bank Ltd is a digital bank founded in London in 2015 that currently operates all over the world where Mastercard is accepted. It serves more than 5 million customers via smartphones and offers current and business current accounts, joint accounts, payment cards, savings accounts, overdrafts, and consumer loans.
With a valuation of $4.5 billion, Monzo received new capital after Chinese tech giant Tencent injected $100 million in capital for a minority stake in the firm. This interest in the neobank is a sign that better times are yet to come. Thus, a major step is a preparation to dive deeper into cryptocurrency trading and further develop its “buy now, pay later” (BNPL) product, raising over $500 million. The BNPL product was introduced in September, making Monzo one of the first UK banks to venture into a fast-growing sector dominated by industry heavyweights Klarna and PayPal.
Starling Bank Ltd is an innovative British bank founded in 2014 that allows customers to set up international bank transfers to 38 countries, choosing from a range of 20 different currencies. It has not been in the news as much as Revolut and Monzo, however, this challenger bank has built a loyal customer base over the past eight years, which reached 2.1 million in 2021. It provides its users with all kinds of personal and business accounts alongside a child card and a range of lending products. Starling also provides B2B banking and payments services through its BaaS model based on the proprietary technology platform that it uses to power its own bank.
With a valuation of $1.9 billion, Starling is fully licensed by the UK regulator that has plans to offer its Banking-as-a-Service across Europe, including France, Germany, the Netherlands, and Spain, in the first half of 2022. Last year, the startup received accreditation under UK government-backed business loan programs. Its larger plan lies in increasing lending through strategic arrangements, organic lending, and targeted mergers and acquisitions. As a part of a plan, its first acquisition was Fleet Mortgages, in a more than $69.1 million deal.
Lunar is a digital mobile-based banking app founded in 2015 that serves more than 400,000 individual and business customers across Denmark, Sweden, and Norway. It provides a range of financial services including insurance, savings, budgets, loans, investments, and business accounts.
Lunar received its banking license in 2019 and in 2021 acquired Swedish consumer lending and peer-to-peer savings platform Lendify. With a valuation above the $1 billion mark, the challenger bank has raised €210 million in a Series D funding round led by family-owned investment company Heartland, alongside European growth investor Kinnevik and Chinese tech giant Tencent. Lunar is looking to modernize its existing core systems as well as introduce new services and customer offerings, leading to its choice of a new core banking solution, Thought Machine Vault.
Holvi is a digital bаnking sеrviсе founded in Helsinki in 2011 that focuses on professional accounts for self-employed and small businesses. It serves more than 200,000 customers (mostly in Finland, Germany, and Austria) by offering mobile banking, credit and debit cards, business current account, which includes digital receipt management, an invoicing tool including e-invoicing, and expense management.
Holvi has a bizarre path since it was sold to BBVA in 2018 and then bought back in 2021 by founder Tuomas Toivonen. This maneuver initially negatively affected the number of active customers, but according to founder Tuomas Toivonen, the startup has rebounded and is now making more money than ever. Since then, the company has increased monthly revenue by 40%. Going forward, Holvi plans to double down on its German and Finnish businesses and is also considering a possible return to the UK market. Toivonen's mission is to make Holvi a top player in small business banking in Europe.
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Over the past few years, much attention has been paid to the future of money.