Neo and Challenger Bank Market by Type of Bank (Neo Bank and Challenger Bank) - Global Opportunity Analysis and Industry Forecasts, 2016-2020

Neo and Challenger Bank Market Overview:

Neo and Challenger Bank Market is registering a CAGR of 50.6% during the forecast period 2016-2020. Neo and challenger bank market has witnessed healthy growth rate in terms of customer base over the past few years, and is expected to witness optimistic growth in the near future.

The global market is driven by factors such as government regulations, convenience offered to consumers, and low interest rates as compared to traditional banks. However, acquisition of customers and profitability are major challenges faced by these banks. Increase in penetration of smartphone and internet in the emerging economies are expected to offer lucrative opportunities for market growth. Recent approvals of MYBank and WeBank by the Chinese authorities have provided opportunities to digital-only banks to expand their presence in China.
 

Neo and Challenger Bank Market Segmentation

Segment Review

The report analyses the neo and challenger bank market in terms of customer base based on bank type and country. On the basis of bank type, the market is segmented into neo and challenger bank. The report provides the market analysis of key countries namely, U.S., UK, Germany, China, and Australia. Neo banks lead the market in terms of customer base, and are expected to maintain their dominance throughout the forecast period. Challenger banks are expected to witness rapid growth in customer base in the near future due to favorable regulatory norms and enhanced convenience offered by these banks. Moreover, high prevalence of mobile and online banking in regions such as U.S., UK, and Australia is expected to drive the market in the coming years. In addition, increase in investments by angel investors and venture capitalists in fintech startups would aid these banks to sustain the competition. Furthermore, widespread launch of digital subsidiaries by traditional banks and large customer base of these banks are expected to supplement the market growth.
 

TOP IMPACTING FACTORS: NEO AND CHALLENGER BANK MARKET

 
Convenience offered to consumers

Traditional banks offer banking services to businesses and consumers through their branches and other online channels. The emerging trend of neo and challenger banks offering their banking services through digital channels (online or mobile app banking) in Europe and U.S. is expected to boost the market growth. Moreover, customers do not have to visit bank branches for opening bank accounts and processing their loans, which supplement the market growth. Thus, enhanced convenience offered by these banks for such services is expected to increase the customer base and boost the market growth.

Regulations supporting market growth

Approvals and granting of banking licenses by financial authorities have increased over the past few years. This has supplemented the market growth and offered opportunities for development. For instance, Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have approved and granted licenses to neo and challenger banks, namely Atom Bank in June 2015, Tandem Bank in December 2015, Starling Bank in July 2016, and Monzo Bank in August 2016. In addition, German Banking Authority, BaFin, has granted licenses to Fidor Bank in 2009, and N26 bank in 2016. Chinese authorities have approved and granted licenses to WeBank and MyBank to cater to the financial needs of small entrepreneurs. This is expected to positively impact the market growth.
 

COMPARATIVE SHARE ANALYSIS OF NEO AND CHALLENGER BANK MARKET CUSTOMER BASE, BY COUNTRY 2016 & 2020 (%)

 
The U.S., UK, and Germany occupy prominent shares in the market in 2016, owing to favorable regulations, higher fintech adoption index, and rise in investments in these countries. The U.S. is expected to be the market leader during the forecast period. China and the UK are expected to witness higher growth rates on account of relaxations in regulatory requirements, high penetration of internet and smartphones, and large untapped consumer base in these countries.

UK: a lucrative market for neo and challenger banks

The UK accounts for approximately one-fifth share of the total customer base in 2016, and is the second largest market in terms of customer base among U.S., Germany, China, and Australia. Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) provides approval of digital banks launched in the UK market. The high penetration of smartphones (64%) and retail banking in the region has contributed to the growth of the neo and challenger bank market. The region has witnessed an influx in the number of neo and challenger banks in the recent years. Atom is one of its first kind of challenger banks that has received funding of $167 million. Some of the other popular digital neo and challenger banks along with their customer base in the region are Atom Bank Plc (40,000), Monzo Bank (40,000), and Pockit (100,000). Fidor Bank Ag and Number26 are few of the challenger banks that were launched in Germany, but intends to expand in the UK market. There are several new banks, which have received or are yet to receive the banking license (challenger bank) or would work in collaboration with traditional banks as neo banks. Starling bank and Tandem were granted banking licenses in July 2016 and July 2015, respectively. Osper, Loot, and Monese are some of the neo banks launched in 2012, 2013, and 2014, respectively.

UK Neo and Challenger Bank Market Customer Base, 2016-2020
 
Competitive landscape

The key market players profiled in the report are Atom Bank Plc, Movencorp Inc., Simple Finance Technology Corporation (acquired by BBVA), Fidor Bank AG (acquired by BPCE Group), N26, Pockit Limited, UBank Limited, Monzo Bank Limited, MyBank (Alibaba Group), and WeBank (Tencent Holdings Limited). They have adopted product launch and partnership & agreements as their key strategies to strengthen their foothold and increase their customer base. Prominent players, such as Atom Bank Plc, N26, UBank, and WeBank, have launched new products and extended their service offerings of existing products to sustain the market competition. The other players in the value chain include Holvi Bank, Hello Bank, Koho Bank, Rocket Bank, and Soon Banque.

KEY BENEFITS

• The report provides an in-depth analysis of the neo and challenger bank market across major countries as well as the projections of customer base for the forecast period.
• The projections in the report are based on analysis of the current market trends and highlights the market potential for the period of 2016‐2020 in terms of customer base.
• The report conducts extensive analysis of the market by following key product positioning and monitoring the top contenders within the market framework.
• The report provides quantitative as well as qualitative market trends to help the stakeholders in understanding the situations prevailing in the market.

KEY MARKET SEGMENTS OF NEO AND CHALLENGER BANK MARKET

BY BANK TYPE

• Neo Bank
• Challenger Bank

BY COUNTRY

• U.S.
• Germany
• UK
• China
• Australia

MARKET PLAYERS IN THE VALUE CHAIN

• Atom Bank Plc
• Movencorp Inc.
• Simple Finance Technology Corporation (acquired by BBVA)
• Fidor Bank AG (acquired by BPCE Group)
• N26
• Pockit Limited
• UBank
• Monzo Bank Limited
• MyBank (Alibaba Group)
• WeBank (Tencent Holdings Limited)
• Holvi Bank
• Hello Bank
• Koho Bank
• Rocket Bank
• Soon Banque