As Neobanks Pivot from Growth to Revenue, Your Competition Will Get Intense. Six Steps to Get Ready Now.
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Competition between traditional institutions and neobanks has focused on customer acquisition, and chiefly deposit accounts at that. But as U.S. neobanks mature and a steady stream of new entrants arrive from other countries, the battlelines are shifting and the stakes will only get higher.
“We’re already seeing 30% to 40% of acquisitions going to neobanks globally,” says Christoph Stegmeier, senior partner at Simon-Kucher & Partners. “And almost one in four primary banking relationships now sits with a digital player.”
To date, that shift hasn’t eroded the revenues of traditional institutions. “Most of the revenue has stayed with incumbents,” says Stegmeier. Only 5% of financial services revenue is presently going to neobanks, according to Simon-Kucher’s Global Neobanking Study 2026.
The emerging threat: “Over the next five years,” says Stegmeier, “neobanks will move away from a focus on pure growth and will very much move into the more profitable buckets of banking.” He says this has already been happening in other regions around the globe and will be seen increasingly in the U.S. as well.
While incumbents are unlikely to face a sudden collapse, the study says, “the greater risk is a steady erosion of market share as full digital players continue to scale.”
The political factor: The current atmosphere in Washington appears to favor giving full-fledged bank charters to neobanks that want one, with all the powers thereof.
What this means: As neobank competition intensifies, traditional banks and credit unions need to change their competitive stance, Stegmeier believes. He says they can do this by pulling pages right out of neobanks’ own playbooks.
Need to Know:
- Fewer but stronger: The population of neobanks has shrunk over the last couple of years, but many of those remaining are stronger and approaching the point where they will profit from deeper and broader customer relationships.
- Global players: Latin America is leading neobanking growth globally and in Brazil penetration is quite deep. Brazil’s Nubank received conditional approval in the U.S. for a full-service national bank charter in late January.
- The death of primacy: Simon-Kucher believes neobanks’ growth has accelerated the decline of the traditional primacy model. How far could that erosion go?
- Regionals at risk: “Across most markets, regional banks are losing relevance and run the risk of becoming casualties of continued neobanking growth.”
The U.S. Neobank Sector Lags. But for How Long?
Stegmeier says that U.S.-based neobanks, as an industry, are not as powerful as neobanking is in most other countries.
Why? Stegmeier says the U.S. market, which still offers thousands of banking choices, is more fragmented than other countries. Another factor is that many neobanks and fintechs here still lean into interchange income.
“For lack of another word, I think the neobanks were lazy,” says Stegmeier. “They were just building out traditional banking products with a better user experience. It was a bit too easy to grow.”
As a result, they have not yet built out their balance sheets with interest-producing products. Globally 75%-80% of neobank revenues come from interest income, he says, but most U.S. neobanks generate just 20%-30% from interest income, if at all.
But he also thinks this will change over the next five years.
Read more: Consumers Say It’s Not You, It’s Chime
Neobanks From Outside U.S. Will Turn Up the Heat
Foreign neobanks are coming to the U.S. with big plans and broader shelves of products. Beyond the Nubank charter, Revolut, which is already doing business in the U.S., has announced plans to acquire a U.S. bank in favor of filing a national bank charter application, according to the Financial Times.
Global players have ambitious product plans for the U.S. Nubank’s initial three years will focus on checking accounts, credit cards, unsecured personal loans, and digital asset custody and related services. For its part, Revolut is already pursuing a private banking strategy and Stegmeier thinks it will also get into U.S. lending.
Neobanks may get physical. In many other countries, neobank branches are a non-sequitur. But Stegmeier says banking is consumed very differently in the U.S. Customers still perceive value in branches, he says, and he would not be surprised to see, say, a Revolut branch or two, particularly for serving private banking customers.
Read more: Why the Rise of AI Makes Branches More Important than Ever. (At Least for Now)
Wealth Management Will Be Next
Stegmeier says affluent customers make an attractive target for neobanks. They represent demand for deposits, investments and credit. In Canada, Wealthsimple, founded in 2014 and targeted at the affluent with a tiered subscription model, serves over three million Canadians with deposit accounts, investments, mortgages, advice and even gold and crypto.
“I think we’ll see neobanks in the U.S. going after affluent customers more and more,” says Stegmeier.
Six Steps to Take Today to Counter Neobanks
Simon-Kucher’s report outlines half a dozen ways traditional players can counteract neobank competition as it accelerates.
1. Adopt a growth-hacking mindset that drives constant experimentation.
Neobanks often excel in running hundreds, even thousands of small tests to optimize their marketing. And they’re fast: New efforts deploy in two days or less, not the multiple weeks that Stegmeier says are typical of traditional banks’ efforts.
Insider tip: Referrals win. Stegmeier says referral business is a significant driver of neobank signups, so they devote much of their growth-hacking to email strategies promoting referrals.
He points to Wealthsimple for a unique referral campaign. Multiple actions that customers can take, from making referrals to depositing money, earn them entries in a mammoth lottery.
The juicy prize? Ownership of a sprawling, $3 million (Canadian dollars) home in Vancouver.
2. Use gamification to turn everyday banking into repeated engagement.
Ever try the language app Duolingo? Stegmeier says the company uses gamification to keep people coming back for more and more lessons. Gamification of things like “streaks” builds engagement. He says traditional banks and credit unions can tap gamification to draw people to their apps and websites to increase engagement.
Example: Stegmeier says a South Korean neobank offered a higher interest rate to customers who moved money into its deposit products for 30 days in a row.
Read more: How Can Banks Reel in Gen Alpha? Try Learning From Roblox.
3. Push product offering and design past legacy banking boundaries.
Banking is considered a commoditized business for a reason: Everybody offers the same basic stuff.
By contrast, neobanks in other countries have been adding all sorts of nontraditional products and features to their rosters. One such is eSIM cards to accommodate foreign travel and the need for data at affordable prices.
“Banks need a different lens. They need to figure out what nonbanking products would really work for them,” says Stegmeier.
4. Simplify monetization of your offerings.
Stegmeier says this entails subscription-based pricing and disciplined bundling, in part to make clear to customers how they obtain value from the relationship. He adds that the recently unveiled Bank of America BofA Rewards program, effective in late May, could turn out to be a good application of this principle.
“You might have a smaller margin as a bank on each individual product, but you might get a bigger share of the customer’s overall business,” he says.
5. Build a faster-moving organization.
Banks take forever to make decisions and so much is still done by committee, according to Stegmeier. In contrast, he points to a Revolut program called “New Bets” that is designed to get fresh ideas off the ground. A “pod” of staffers gets a chunk of money and autonomy to develop a new product.
“In startup fashion, there’s very little corporate governance,” says Stegmeier. The ability to use AI for prototyping can help develop and test working versions of new ideas in days.
6. Start leveraging AI. The neobanks already do.
Beyond prototyping, AI can help meet goals for personalization and scale beyond banking norms by automating relationship management, according to Stegmeier.
He adds that the largest banks are probably at par with the neobanks in this area — but not so banks below the top.
Read next: How BECU’s AI Financial Advisor is Moving Beyond Product Answers to Customer Handholding
