Neobanks Have Grown Up: From Digital Banking to Financial Platforms

I love Revolut. My wife and I travel a lot, and we are convinced that Revolut offers us a better user experience and product than we can get from a combo of the offerings of our traditional banks and credit card firms. Judging from interactions with folks in my network, many of our friends seem to think the same.

So, this is a good time to be a bit more analytical and layout what neobanks are doing to gain traction, as well as to understand more about the successes and failure.

What Is A Neobank?

A useful place to start is with a definition:

A neobank is a digital-first financial institution that delivers banking services primarily through software rather than branches. Some hold their own banking licence, while others operate through licensed banking partners using Banking-as-a-Service infrastructure.

That said, not every neobank is actually a bank. There are really three models.

That said, not every neobank is actually a bank. There are really three models:

Underneath the hood there is a bank with some form of banking license. The service offering typically covers payments, debit cards, maybe credit cards.

Revolut is a good illustration of how quickly a firm can move between those boxes. It applied for a UK banking licence in 2021, received authorisation with restrictions in July 2024, and in March 2026 the Prudential Regulation Authority lifted those restrictions, allowing Revolut Bank UK Ltd to launch as a fully licensed bank with FSCS-protected deposits for its 13 million UK customers.

Why Mobile First Changed The Product

For me, two ingredients stand out. First, the mobile first bias. Millennials and Gen Z seem to have a bias for having their lives revolve around their phones. Rather than just trying to digitise their existing processes, successful neobanks seem to have been able to re-think banking, starting from the question: what should a good user experience for somebody on a mobile look like?

My own experience might help illustrate the challenges the legacy providers have. I live in Switzerland, yet I am often in the UK, Italy and Germany, as well as spending longer periods in South Africa.

A few years back I was in the UK pretty much every week. I spent a lot of pounds. I had an Amex card from Cornercard in Switzerland. Good deal for the BA air miles, horrid deal on the FX rate on all those GBP charges. At some point I ended up in a meeting with the CEO of Cornercard. I asked if under the same Amex I could have a second card, in GBP, and the same deal for air miles. The answer was an emphatic “No, CHF billing only”.

If I want to open an account in another currency with my bank. UBS, there are forms to be filled in, in wet ink and physically mailed back and forth.

Then along came Revolut. I have an account and a base currency, Swiss Francs. I can add accounts in other currencies from my phone. I have a physical card; I can order another one if I want it and I can have virtual cards. Last week, I was in Milan, spending Euros. I was able to swap CHF for EUR on my phone, on the fly, at better rates than either UBS would offer me or the credit card folks at Cornerbank would charge me. As long as I had a Euro account with enough Euros in it, Revolut used my available Euro balance. No expensive FX charges. Everything immediately visible in the app.

The Small Features That Legacy Providers Still Can't Match

My favourite difference between things new and old is a security feature. In South Africa, I need to be careful on matters security. I have a local phone with only virtual cards in the wallet. My Revolut card allows me to set a spending limit dynamically. If my phone is stolen, and the thieves manage to open it, my downside is limited. I also have a virtual Cornercard. Nothing dynamic there at all. You can only set a limit when you create the virtual card. I have asked for “the same as Revolut has” a number of times. So far, deaf ears.

The UK Neobank Market: Scale Versus The Incumbents

The UK remains arguably the world's most successful neobank ecosystem. It has created an entire ecosystem of successful firms which have achieved scale, profitability or international expansion: Monzo, Starling Bank, Revolut, Atom Bank, OakNorth, Monese, Wise

Although Monzo and Revolut have grown extraordinarily quickly, they are still smaller than the UK's largest incumbent banks in terms of domestic retail customer numbers. However, Monzo has reached meaningful scale at around 75% of Barclays UK's customer base in just over a decade, which is remarkable considering Barclays has been serving UK customers for more than 330 years.

The UK’s broad-based success has a few ingredients: a regulatory environment, talent pool and competitive market that allowed multiple firms to achieve scale, profitability and international influence.

Latin America: Nubank And The Banco Inter Exception

South America is another success story and perhaps the most interesting market:

Nubank in Brazil, Banco Inter, C6 Bank, Ualá in Argentina, Mercado Pago, PicPay

Nubank is arguably the world's greatest neobank success story. Across just three markets, Brazil, Mexico and Colombia, it serves well over 100 million customers, comfortably more than Revolut's global base. Its focus has been to deliver a country-specific banking experience, compared with Revolut's single global platform approach.

What is interesting in the neobank space generally is that legacy institutions have not proven able to really compete. Brazil’s Banco Inter is the exception to that rule. Formerly Banco Intermedium, it was a specialist mortgage and payroll lender. Around 2015 it transformed into a fully digital bank and today is widely regarded as one of Latin America's leading digital banks. This is similar to how DBS transformed itself in Singapore, using an existing banking licence and balance sheet while completely reinventing the customer experience.

The UK’s NatWest tried the same play, with Bo, but closed the venture in its infancy.

The Marketplace Model And Diversified Revenue

Another ingredient in the successful rapid scaling has been the marketplace model. Legacy institutions typically make every product themselves. A neobank might provide the current account itself but offer a marketplace for insurance, pensions even investing. The customer experiences a single app, even though many different providers are delivering the underlying services.

Revolut have borrowed a play from the Goldman Sachs playbook; they are long-term greedy. They are focussing on owning the client relationship through their app.

This helps drive a diversified stream of revenues: subscriptions, FX, investing, interchange, business banking, merchant services, wealth products and premium services.

Why Legacy Banks Struggle: The Old Iron Problem

My take is that there are two major obstacles which cause friction between the old and the new. One is the ability to envisage what good needs to look like. The other is the willingness and ability to develop on a new platform. IMHO, fiddling with the old iron is not going to do the trick.

In wholesale banking, I see that there is a similarity when I look at the success of JP Morgan’s Kinexys platform for 7/24/365 digital payments. Ten years back, JP like all its peers, had an “old iron” processing system for DDA, demand deposit, accounts. It could do USD things at scale. Non-USD was like brain surgery. I am not exaggerating; I was in the room at a major planning meeting around FX Payments. What has been food & drink for Swiss banks for decades, to make a payment not in the currency of the account, was a mountain to climb for the JP folks. A couple of years later, when they saw crypto coming, they made a conscious decision to build an entirely new set of rails, or a parallel universe if you will, and not to try to make the old dog of an old iron system do new tricks.

At NatWest, the grand vision for Bo, as I understood it from talking to insiders, was that it would be the new platform and one day, the bank could shut-down its legacy systems. Sound idea, which needed patience from the executive suite which turned out to be short supply.

With all things bleeding edge in financial services, there are a number of risks when I write: There is every risk that I haven’t understood properly, or just missed a few salient points, or just come to an implausible conclusion. If any of these things are true, please call me out on them.

In any case, please do share a comment or two.

Please feel free to get in contact via LiquidityFinder here.

Frequently Asked Questions

What is a neobank?

A neobank is a digital-first financial institution that delivers banking services primarily through software rather than branches. Some hold their own banking licence, while others operate through licensed banking partners using Banking-as-a-Service infrastructure.

Is a neobank a real bank?

It depends on the model. Licensed digital banks such as Monzo and Starling hold their own banking licence. Fintechs such as Chime and Current operate through a partner bank. Financial platforms such as Wise and Mercury deliver banking services without being the licensed entity themselves.

Which is the largest neobank in the world?

Nubank, which serves well over 100 million customers across Brazil, Mexico and Colombia.

Why have traditional banks struggled to compete with neobanks?

Two obstacles stand out: the ability to envisage what a genuinely good digital product looks like, and the willingness to build on a new platform rather than modify legacy systems. NatWest's Bo is an example of the second obstacle. JP Morgan's Kinexys, built as an entirely new set of rails, is an example of getting it right.

What is the neobank marketplace model?

Rather than manufacturing every product in-house, a neobank provides the current account and offers third-party products such as insurance, pensions and investments through its app. The customer sees a single interface while multiple providers deliver the underlying services.