The neo bank sector looks to grow substantially into 2025, where it will begin leveling off. Data from Statistica shows user penetration at 4.88% in 2017 and growing to 78.17% in 2025. 2026 shows growth leveling out at 79.52%.
The USA is by far the largest region for neo banking when measured in dollar terms. 2022 total transactions are expected to be $1.228 billion. The closest region to the US is the UK at $741.6.
Transaction values are expected to grow substantially over the next few years. In 2017, transaction values were only $0.07 trillion. By 2026, they are expected to be at $2.52 trillion.
What's driving this large growth? It's mainly mobile banking and fully digital banking experiences. The pandemic greatly helped the neo banking effort. It forced customers into digital banking experiences, whether through their existing bank or a neo bank. Customers have become more comfortable banking digitally.
Neo banks have always leaned towards digital. They were not known for having branch offices. This drastically cuts capital and operating expenditures, allowing neo banks to focus on digital experiences. Neo banks pass these savings on to their customers through no-fee checking accounts.
A neo bank isn't just a stand-alone banking startup. Traditional banks have started providing neo banking services as well. CapitalOne 360 is a completely digital experience. It offers customers a checking account with no minimum fees. Goldman Sachs first foray into retail banking was launched by its neo bank arm called Marcus. Marcus also offers a no-fee checking account. Discover Bank from Discover Financial Services is another neo bank within a traditional banking institution.
Neo banks aren't directed at only retail. Business banking is a growing segment and is expected to reach 45% CAGR through 2028, according to Global Market Insights.
As a result of the pandemic, a larger segment of customers has grown accustomed to banking online. Many traditional banks have shuttered branches in an effort to save on costs. Those savings have gone towards improving their digital banking experiences. This shows that completion from neo banks has positively impacted traditional banks.
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