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Banking services are going digital, and the consumer adoption rates of Neobanking are rising: new yStats.com report.

Banking services are going digital, and the consumer adoption rates of Neobanking are rising: new yStats.com report.

The new report from Germany-based market intelligence firm yStats.com, “Global Neobanking Market and Trends 2021” offers a comprehensive overview of the new developments in the Neobanking market worldwide and provides insights into future industry developments. Among other findings, the publication reveals that rising global digitalization especially after the onset of COVID-19 is likely to support the acceleration of Neobanking in the near future and increase the adoption rates.

Neobanks are likely to see a surge in the number of users in the near future

Appearing naturally as the result of global digitalization, Neobanks are becoming increasingly trusted by consumers in many parts of the world. Furthermore, the number of digital-only banks increased at least 4 times as 2020 ended, compared to two years earlier. Moreover, as consumers transfer their banking transactions into digital even while remaining clients of traditional banks, many of them realize that the challenger banks offer attractive options such as fully online services. This has led to the increased Neobank consumer penetration rate of six percentage points globally. Additionally, as both the demand and supply rise, Internet-only banks felt the need to differentiate themselves not only from the traditional banks but also from their direct competitors by targeting certain population groups and offering specific services that are still new to the market, as detailed in the new yStats.com publication.

In the latest global ranking of Neobanks, those from Europe and North America dominated significantly  

In the European region, consumers claim to be still rather conservative when it comes to choosing a bank and opening an account. According to a recent survey cited in the yStats.com publication, less than 5% of those surveyed would trust Neobanks their long-range financial well-being, and only a slightly larger share of respondents claimed to have a lot of trust in this type of bank. The newness and sometimes brash style of the Neobanks contrast with the image of the large, sometimes state-owned established traditional banks. Nevertheless, the number of digital-only banks in the region is growing, and the number of clients is following an upward trend in all countries considered in the new yStats.com market report. With that, among the leading markets in the area is the United Kingdom, while Germany lags in terms of Neobanks adoption. This is despite the German home-grown Neobank N26 being in the top 10 digital-only banks in the global ranking by the number of clients. Meanwhile, in the same ranking, 8 out of 20 top Neobanks had their origin in the United States, showing the growing importance of the Internet-only banks in the country, which was also reflected in the number of Neobank account holders in the country.

Other global regions are making efforts to catch up with Europe and North America in terms of Neobanking development  

Authorities in the Asia-Pacific region have recognized the rising global trend, but the regulatory implementation is still in the developing phase. Some markets, such as Australia and Hong Kong, already clearly stand out in terms of Neobanks adoption, while others are still rather resistant. Meanwhile, in Latin America, mainly thanks to Brazil and Mexico, the number of Neobanks has been increasing by almost 30% year-on-year on average in the last decade, with NU Bank being currently the largest one in the region by its customer base, as detailed in the new yStats.com market report. At the same time, the Middle East and Africa have still a long way to go to reach the level of digital-only banks market development in that part of the globe. Nevertheless, with the high level of fintech adoption, the market is promising.