Skip to content

3 min read
Cloud technology innovation, favourable government legislation and evolving customer demands have contributed to the rise of neobanks. Kunal Galav reflects on how the industry has evolved.

The advantages of neobanks first became apparent to me in 2016 when I noticed how painless banking could be with less bureaucracy, form filling and long wait times. However, mobility was the real key to digital banking’s success. Neobanks offering digital banking services via smartphones were able to crack a segment of a market dying for convenience.

Customers immediately enjoyed the simplicity of this new way of banking, but no one expected it to take off the way it did. Yet at Mambu, we knew agility and speed were going to be the future of finance, so we put digital transformation at the forefront of our offering. We understood that this rise of neobanks meant customer experience had become a differentiator for fintechs and a saving grace for the incumbents.

Digital banking moved from concept to a serious business model when neobanks growth and scale couldn’t be ignored. Starling Bank and Monzo began to reach deposit levels of up to £10 billion, making it hard for incumbents to dismiss them as inconsequential. As neobanks moved from innovator to mainstream and everyday, they passed a key banking milestone.


The ups and downs of digital banking

Although born in the digital age, neobanks are relevant not just for this but also because they are fundamentally human first businesses. By working backwards and focusing on incrementally improving customers’ daily financial experiences, banks became trusted advisors. This came to the fore especially during the pandemic when customers' needs were acute and urgent in a very uncertain period.

Customers needed that human touch from banks more than ever and neobanks stepped up at this challenging time. For example, Starling Bank offered secondary cards to support self-isolating customers, not with profit in mind, but simply because it was the financial support they needed and the right thing to do. By rapidly deploying new services whilst providing a helping hand, customers felt seen, heard and valued.

But I believe there’s still room for improvement. The number of users who have their primary account with neobanks is still fairly low, likely due to mistrust and inertia. It could be that neobanks are still a new concept to most or just that customers have long-standing loyalty to traditional banks. Whatever the reason, customers are still turning to incumbents for bigger deposits and transactions. However, with financial inclusion becoming a priority, we can expect neobanks to increasingly sway and appeal to younger banking customers.

Savings and credit is another area where neobanks have not yet hit the mark. Given the speed and agility of neobanks, it’s surprising that loan services haven’t become dominated by digital banks and lenders. Customers don’t need another credit service as it’s been done before, neobanks need to utilise their agile structures and pursue high growth niches in need of innovation.

Where do incumbent banks fit in the picture?

Incumbents have earned a seat at the table, but for how long? Are incumbent banks really winning back customers or is it just a draw to the free money that many are rolling out.  To remain competitive, banks must offer financial incentives that come from the right place, as illustrated by the Starling example during the pandemic.

The issue isn’t how, but rather why. Incumbent banks need to change their mindset from managing risk and balancing books to making customers' financial lives better. Neobanks understood this, while incumbents were slower to adapt.  They remain competitive by replicating financial innovations, but it can only go so far. Until they shift towards customer-centricity, neobanks will continue to increase their market share and win-over customers, particularly young banking consumers.

  • Kunal Galav, Global Head of Partnership Development & Head of Advisory, EMEA, Mambu
  • Sam Everington, CEO of Engine, Starling Bank
  • Sarah Kocianski, Fintech and Insurtech Strategy Consultant, CCG Catalyst Consulting Group

Share this post

Mambu Communications
Our PR & Communications team includes marketers, content creators and online experts, and provides insights and expertise from the entire Mambu team. For media queries, please contact us at
Mambu Communications