Are neobanks gaining momentum?

Source: Kantar study “Future Finance – From bricks to clicks: the impact of neobanks so far”, 2019


New Kantar study

Research agency Kantar’s latest report “From bricks to clicks: the impact of neobanks so far” investigates the share of wallet of so-called neobanks – online retail banks with no physical offices – in a number of international markets. While judging by the number of downloads it may seem that their market penetration is growing rapidly everywhere, the actual usage is lagging behind, except in China, India and Brazil, traditionally financial markets with lots of previously unbanked citizens. In mature markets like Europe and the US, neobanks do report fast growing numbers of new customers, but those customers tend to try it out on their smart phones, curious about new (free!) app features and attracted to young and hip brands like Monzo and Revolut. However, up to now few customers really switch from their traditional bank account to one of the neobanks, leading to relatively low shares of wallet, typically 1-3% or less. 

Neobanks in China: a totally different story

The situation in China is totally different: with a market penetration of 93%, 42% of Chinese retail customers consider one of the neobanks to be their primary bank, resulting in a 39% share of wallet. This is partly because of the integration of neobank services with social media: 91% of Chinese customers bank with Alipay, 51% with JD Finance. The share of wallet of neobanks Nubank, Banco Inter and Next in Brazil is even bigger: 40%, with India following at 24%.

Digital transformation is key

On the question whether traditional banks in the US, Europe and Singapore should be worried or not, the study argues that there is no ground for complacency. The market is now all about delivering an excellent customer experience and growing share of electronic wallet. Any retail bank lagging behind in digital transformation stands to lose customers on two fronts: to the neobanks themselves, and to those traditional banks that are truly investing in delivering an enhanced digital customer experience, often copying innovative features previously introduced by neobanks. 

Extending product portfolios

On the question what neobanks themselves should do to grow their share of wallet in mature financial markets, the study argues that extending their product portfolio more widely, instead of just deep selling their P2P service offerings to more customers.

Read the full report here (registration required).

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