Modern customers are looking for expedience and convenience in all areas of life, and banking is no exception.
Rather than visit a branch just to wait in line or phone in just for robotic responses, customers want banking at their fingertips - fully digitized. As entirely virtual banks, neobanks offer the convenience modern consumers are looking for, and because of that, neobanking is on the rise.
To learn more about the proliferation of neobanks, the current state of the market, and the rapid changes it’s undergoing, we’ve curated a list of the top neobank statistics, sorted by category.
By the end, you’ll have a complete picture of the current state of the neobank market, including past trends and future predictions. To start, let’s dive into the industry as a whole and look at the market size and share.
To be effective in any niche, you have to understand the market. Before we explore how you can be successful, we’ll touch on the current state of the market by exploring statistics about the market size and the growth it’s experienced in the last number of years (and will continue to experience in the near future).
If you haven’t already, go check out our post on money laundering typologies neobanks should know to find out the actual threats you’re facing.
Global Neobanking Market Size and Growth: By Dollars
The global neobanking market is currently valued at approximately $66 billion USD
- The global neobanking market size was valued at $47.39 billion USD in 2021, up from $34.77 billion in 2020.
- The global neobanking market size is expected to reach $66.82 billion USD in 2022.
- Market size is expected to grow at a compound annual growth rate (CAGR) of 53.4% from 2022 to 2030.
- The global neobanking market is expected to exceed $2 billion USD by 2030.
Why it matters:
We’ve seen a significant increase in the market size of neobanking (to the tune of 36% YoY growth from 2020 to 2021), which suggests that more users are seeking digital banking solutions. With the compound annual growth rate expected to be higher over the next 8 years, this trend is only going to continue.
Projected to hit more than $66 million USD in 2022 (and still climb to over $2 billion by 2030), it’s clear that the current customer climate of prioritizing convenience has won over; with digital banking being a secure, simple, and accessible option for modern consumers.
How to apply this:
Whether your neobank is established or just starting out, it’s essential to maintain safety and reliability of your products and services. Make sure that you choose a risk and compliance system that can grow with your business, and won’t require consistent alterations (or worse, replacements).
Where there’s a will, there’s a way - and fraudsters think no differently. As a new technology directly tied to large sums of capital, neobanks are going to be a target for bad actors seeking to commit fraud.
Neobanks should see this market growth as a sign of great opportunity, and should seek to take advantage of the interest in the market; they should also proceed with caution and make sure to put customer safety and security first, protecting their own interests along the way.
Global Neobanking Market Size and Growth: By Users
There are currently approximately 210 million global neobank users
- There were 146.42 million global neobank users in 2021.
- The number of neobank users is expected to hit 210.02 million in 2022, and 350.12 million in 2026.
- The user penetration rate will be 2.8% in 2022, but it’s expected to hit 4.4% by 2026.
- The number of US digital-only bank account holders is expected to increase from 29.8 million to 53.7 million from 2021 to 2025.
Why it matters:
The number of global neobank users is growing rapidly. The number of consistent, active users speaks to the health of any new technology, as it reflects our confidence in - and desire to have - that technology. With the number of users growing at 35% annually over the past 5 years, neobanks are showing themselves to be the clear choice for modern, tech-savvy users.
This influx in users is paralleled by increases in the user penetration rate, as more of the market shifts to digital banking solutions like neobanks. Not only are users adopting neobanking as an alternative to banking, but many users are switching altogether, choosing to use challenger banks exclusively over traditional banks.
This trend shows that there are people that are hungry for this type of service, and that they are simply waiting for the right product to be available so they can switch to virtual banking.
How to apply this:
This influx of new users means an abundance of user onboarding for your organization.
Don’t let fraud take root in the first place. As new users make the switch to neobanks, you’ll need to be prepared to set them up - while ensuring you follow all regulatory requirements along the way.
Have a system in place that will help you quickly and seamlessly onboard new customers, and ensure that it performs adequate Customer Due Diligence checks on new users - rooting out potential bad actors from the start.
To deliver the best products, you need to cater to what your customers want in their digital banking experience. That starts with understanding who your customers are. Below, we cover stats on who uses neobanks and what they like most about them.
Who Uses Neobanks the Most
The largest group of neobank users are between 18 and 24
- 10.6% of Americans ages 18-24 have an active digital bank account, followed by the 25-34 age group at 10.5%.
- American men use neobanks more than women, with 9.6% of men having an account compared to 5.5% of women.
Why it matters:
Understandably, neobanks - and digital banking in general - appeals to a younger, more tech-savvy generation. In most cases worldwide, there is a clear trend of higher adoption rates among younger people.
In the US, men are considerably more likely to use a digital bank, with 9.6% of men and 5.5% of women saying they have an account. While other countries see less of a discrepancy, more men than women currently use digital banks globally.
How to apply this:
Understanding who’s adopting your product is important for marketing, advertising, and product development. To truly offer the best product, you have to cater to your customers’ needs and wants.
Overall, the younger the adult (18+), the more likely they are to use a neobank, which is of critical importance to neobanks looking to build their user base. Make sure you offer a modern, seamless user experience that your younger customers expect, while still offering user support to users that are not as adept at using technology.
What Users Think of Fintechs like Neobanks
75% of people are looking for an easy-to-use Fintech solution that’s accessible anytime, anywhere
- Out of the over 8,000 banking customers Capgemini surveyed, 75% of customers said they are attracted to Fintech competitors that offer fast, low cost, accessible, and easy-to-use products and experiences.
- More than 85% said they would recommend a Fintech they use to a family member or friend.
Why it matters:
Modern customers are looking for a simple, low cost banking solution that integrates seamlessly with their life and is accessible anytime and anywhere. Users are overwhelmingly prioritizing neobanks that can offer them frictionless, convenient service, which is what you need to deliver in order to keep your users satisfied.
With 85% of users saying they would recommend their current solution, offering top-class service that keeps your users happy is extremely important for attracting referrals.
How to apply this:
Provide best-in-class service in all areas, and always put your customers' user experience first. Make every interaction with your product simple, frictionless, and enjoyable, so they want to continue using you.
As you develop loyal customers, they’ll spread the word and attract other customers that already think highly of you.
Not only are more people using neobanks, but people are using them more consistently, and trusting more money to neobanks. The transaction values for neobanking reflect this, painting a picture of a service that users are trusting - and backing - more and more each day.
As more money is exchanged over your platform, monitoring for suspicious transactions and managing consequent cases through to filing is a vital component of your AML program. Below, we cover statistics about how you can monitor spending to reduce losses and optimize revenue.
Neobank Transactions and Spending
In 2022, more than 4.02 trillion USD will be spent using neobanks
- The global neobanking transaction value for 2022 is expected to reach $4.02 trillion USD.
- The global neobanking transaction value in 2021 was 2.56 trillion USD; in 2017 it was just $230 million USD.
- The average annual transaction value per user in neobanking amounts to $19.14k USD in 2022.
- Transaction value is expected to show an annual growth rate (CAGR) of 22.01% from 2022 to 2026, reaching a projected $8.91 trillion USD by 2026.
Why it matters:
Between 2017 and 2022, the global neobanking transaction value will have grown 17x, breaking 4 trillion USD. With huge sums being exchanged annually in neobank transactions, it’s clear that digital banking is here to stay. As a new technology in the banking space (and with regulation struggling to keep up with the rapid pace of change), there is no doubt that people will attempt to exploit it.
Not only is the overall transaction value for the entire market growing, but the average annual transaction value per user is also growing, showing that users are injecting more money into challenger banks. This average transaction value is a strong indication of the success of the market, as it shows that users are actively using neobanks - and trusting more of their money on these platforms.
How to apply this:
As transaction value grows, it’s important to make sure adequate screening and transaction monitoring is performed. Overall, this will not only help you reduce fraud on your platform, but will also allow your risk and compliance operations team to set up functional rules to identify patterns of suspicious activity in order to prevent bad actors from taking advantage of your platform in the future.
With more users looking to spend more using challenger banks, you need to offer an unparalleled user experience that keeps users on your platform - and ensures their transactions are secure. Using a solution with machine learning features like predictive scoring can help you meet regulations and keep everyone’s money safe.
False Positives Lead To Lost Revenue (And Can Hurt Your Reputation!)
95% of accounts or transactions flagged as suspicious are false positives
- 95% of accounts or transactions flagged as suspicious are false positives for both neobanks and traditional banks (Sifted)
- In 2020, account closures caused mostly by false-positives led to 1,586 complaints at Revolut and 1,400 at Monzo (Sifted)
- In 2019, Revolut admitted to turning off their detection system after it led to 8,000 false-positive alerts (BusinessInsider)
Why it matters:
False positives, which are legitimate transactions that are falsely being flagged as fraudulent, lead to you turning away valid transactions - or even users. Ultimately, this costs you revenue, but it can also tarnish your reputation with the user, leading to lost users, and even damage to your organization’s reputation. False positives are a consistent, challenging, and costly problem to have.
The issue is so daunting that some companies have shut down their detection system to bypass the massive false positives rates they were experiencing. At the end of the day, false positives are debilitating for the company’s bottom line.
How to apply this:
The fact is, you’ll never fully eliminate false positives, but you should do everything you can to reduce your false-positive rate. Rely on a flexible fraud detection and prevention solution that allows your team to test and validate rules before putting them into production as this will help to limit false positives, while still protecting your network - and organization - from fraud and money laundering attempts.
Keep Up With Suspicious Activity Reports (SARs)
Less than 50 late SAR filings lead to €4.25 million in fines
- A SAR must be electronically filed within 30 to 60 days of detection. (FFIEC BSA/AML InfoBase)
- N26 fined €4.25 million for weak anti-money laundering controls related to fewer than 50 late SAR filings. (The Wall Street Journal)
Why it matters:
Suspicious activity reports (SARs) are required to be electronically filed within a specified time period. In most cases, a financial institution has 30 days to file a SAR; however, if a suspect can’t be identified this time is extended to 60 days. It’s critical to be aware of the time constraints on filing SARs - and adhere to them - to avoid fines and penalties.
Even a small number of late SARs can lead to a significant amount in fines, costing your business revenue - and potentially your reputation.
How to apply this:
Ensure you have a system in place equipped to handle suspicious activity reports; these solutions simplify - and can even automate - the process, ensuring you submit SARs correctly (and on time!). By relying on a solution that automates suspicious activity report creation and filing to law enforcement agencies like FinCEN, goAML, NCA, and more, you save your team time on repetitive tasks.
Even more importantly, you ensure that you are fully compliant with AML regulations, never miss a deadline, and avoid any potential fines and penalties.
Unfortunately, fraud is rampant in the neobank market because bad actors are continuously looking for new ways to exploit the developing technology. This is only more challenging in an atmosphere where regulations struggle to keep pace with the advancements in tech.
To give you an idea of just how serious this problem is, and the true cost of fraud, we’ll look at some stats focused on fraud in the neobank market.
Fraud In The Neobank Market
Fintech fraud rates are 2x credit cards and 3x debit cards
- Fintechs experience an average fraud rate of 0.30%, twice as high as the credit card fraud rate of 0.15 to 0.20% and triple the debit card rate of 0.10%. (AiteNovarica)
- In early 2022, PayPal admitted it had 4.5 ‘illegitimate’ accounts on its network, blaming gaps in their customer acquisition strategy. (Forbes)
- Back in 2000, PayPal lost $6 million, or $1,900 an hour, to fraud globally. (Forbes)
Why it matters:
Although it may seem like a small amount at face value, the fact is that fraud at challenger banks far outpaces that in traditional banking. Fraud can enter at many stages of the user journey, from account sign-up to transactions, so it’s important to monitor all areas that could be affected.
Just as PayPal struggled to keep up with the pace of fraud advancements in the early 2000s, digital banks like neobanks are currently dealing with its continued rapid evolution. As more investment pours into the industry and transaction values skyrocket, it will only attract more fraud.
How to apply this:
It’s important to be aware of the extent of the problem, and that malicious actors are looking to exploit loopholes wherever they can. Always follow proper fraud and AML compliance regulations for everything you do, from transactions to user onboarding.
The potential losses from fraud are steep, and not only include the initial act, but also the time and effort it takes your team to investigate, report, and rectify the issue. Having a robust system that uses many identifiers to detect and prevent fraudulent activity in the first place is the best way to reduce costs associated with fraud as much as possible. Keep your entire network secure by using a high-quality onboarding system that reduces the number of fake - and malicious - accounts you create in the first place.
We’ve already pointed out some of the current and past trends while covering the statistics above. Below are some neobank trends that weren’t quite covered in the stats, but are still important to consider as a professional involved with neobank risk and compliance.
Below we cover 5 of the top neobanking trends to look at leading into 2023.
1. The Future Of Fraud Is Stopping It Before It Occurs
Unfortunately, you can’t stop malicious actors from attempting to commit fraud, but you can stop them in their tracks.
The best way to combat fraud (while still reducing your false positives rates along the way) is in detecting and monitoring for fraud and money laundering and preventing them from occurring in the first place. Whether it’s transactions or account creations, having an effective system that can identify suspicious activity with accuracy will stave off fraud - and the cost it has on your business.
2. Convenience Is Paramount
Modern customers have high expectations of the solutions they use; they want to save time by having apps and tools they can access on the go, where and when it’s most convenient for them.
This is also true in banking, with customers prioritizing convenience - and shifting to neobanks to get the ease of use and access they want. This means prioritizing access via mobile devices and around-the-clock virtual support, so they never have to call a phone line again.
3. Low Costs And Service Fees
Most neobanks offer lower fees than traditional banks, as they have lower operational costs. Many users seem to expect that a shift to a digital banking solution will also come with a reduced price tag.
4. All-In-One Apps Will Flourish
As customers demand even more convenience from the solutions they use, they’ll begin to look for all-in-one solutions that let them manage all of their business in a certain sector - or closely related sectors.
Insurance, real estate, and digital payments are all things that are closely related to banking but currently are managed via separate accounts and platforms. While users currently don’t expect everything to be in one place, they will soon expect to handle business with all financial service providers under one roof.
5. Users Turn To Neobanks For A Better User Experience
Many users are drawn to neobanks because of how the experience feels more than simply the product or service. User experience and user interface are integral to the success of neobanks, as users flock to them for improved - and optimized - platform design, navigation, and the overall experience.
To really get ahead, you need to keep your user’s experience with your product top of mind, and continuously work to make the interface accessible and frictionless.
Neobank Stats: Closing Thoughts
Those are all the statistics we have on the current state of the neobank market. If you’re ready to help your neobank grow with the market, Unit21 offers a perfect solution for combating fraud and false-positive rates. We can also help you with compliance when starting your neobank, ensuring you're compliant from the outset.
For a real-world example, see how Unit21 helped Lili reduce fraud by 50%!
Schedule a demo with us today to see how we can help automate your detection.
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