With funding becoming scarcer, neobanks face mounting pressure to transition from unchecked growth to a focus on profitability. Over the last 18 months, the number of new neobank launches barely exceeds the number of closures. However, both revenues and customer numbers continue to rise impressively.
A significant shift is underway in the neobanking sector. Rather than prioritizing rapid expansion, profitability is now under the spotlight. The 'Future of Neobanking – Profits at the End of the Tunnel' report by global consultancy Simon-Kucher delves into this evolving industry landscape, emphasizing how neobanks are attempting to monetize their offer.
Key insights and highlights from the report:
- Strategic Balance: Neobanks urged to prioritize profitability alongside growth, a critical factor of long-term success.
- Client Surge: Neobanking clients surpass the one billion mark, indicating a remarkable 30 percent growth in 18 months.
- Revenue Ascendancy: Industry revenues soar by ~43 percent in the same period, reflecting potential for further growth and market expansion. On a per client level, average revenues increased from $69 to $75 although with wide dispersion across markets and banks.
- Growth Giants: 20 neobanks now hosting over 10 million clients each, reshaping the landscape and competing with traditional banking giants.
- Emerging Leaders: Six global neobanks identified that combine full year profits and above average growth – uncovering five key success factors that led them to outpace the rest
Eighteen months following their inaugural report, Simon-Kucher – the world’s leading pricing and growth specialist - observed a continued slowdown in the launching of new neobanks. The recent year and a half saw 36 new neobank introductions, which only slightly outnumbers the 34 that either closed or were acquired.
A year and a half ago, Simon-Kucher noted that a mere five percent (or even fewer) of neobanks were profitable. Today, while unprofitable banks remain in the majority, there is a promising surge in the number of neobanks nearing or achieving profitability."
"We've witnessed a pivotal shift as neobanks prioritize profitability," said Christoph Stegmeier, a Senior Partner in Simon-Kucher’s global banking practice, emphasizing the need to balance growth and profitability from the early stages. “The report identifies and analyzes the practices of the six neobanks globally positioned in the 'Better Growth' quadrant of the Neobanking Profitability Matrix 2023, having achieved positive Earnings Before Interest and Taxes (EBIT) while outpacing peer averages.”
For a comprehensive understanding of the neobanking landscape and insights into the future, the complete Future of Neobanking – Profits at the End of the Tunnel report is available upon request.
Simon-Kucher is a global consultancy with more than 2,000 employees in 30 countries. Our sole focus is on unlocking better growth that drives measurable revenue and profit for our clients. We achieve
this by optimizing every lever of their commercial strategy – product, price, innovation, marketing, and sales – based on deep insights into what customers want and value. With 37 years of experience in monetization topics of all kinds, we are regarded as the world’s leading pricing and growth specialist.