United States neobanking market is projected to witness a CAGR of 31.81% during the forecast period 2024-2031, growing from USD 24.09 billion in 2023 to USD 219.49 billion in 2031. Several factors are contributing towards making the concept of a digital-only bank more attractive and workable, hence driving the growth of the United States neobanking market, including reductions in fees and operational costs, making banking services more affordable and attractive to a wider audience.
The essence of neobanking is to provide smooth digital interfaces to provide access to their finances without hustling anywhere, providing ease of accessibility and convenience. The usage of high technology while opening an account speedily attracts customers in search of quick and less time-consuming banking services. The offering generates wider market opportunities due to digitalization and financial inclusion, while demanding shifts due to preferences for tech-savviness and customized banking experiences. With a supportive regulatory framework, strict standards of compliance, and the rapid acquisition of new technologies, neobanks can execute their functions securely and efficiently. Increased access to smartphones and the internet has laid a concrete foundation for neobanking services to reach everybody worldwide and continue growing in this field.
Neobanking refers to banks that operate exclusively online, without any physical branches. These digital-first banks offer traditional financial services, such as current and savings accounts, through mobile apps and websites, often with minimal or no fees. By leveraging digital technology, neobanks provide quick account openings, real-time transactions, and a seamless user experience, addressing the increasing demand for convenient and efficient banking solutions in the modern digital age. In January 2024, SoFi, the digital personal finance company, announced the expansion of a new small business marketplace inside the SoFi product experience. This new feature will allow SoFi to serve millions of American small business owners by connecting their financing needs to SoFi’s network of providers.
Reduced Costs and Innovative Services to Boost Market Growth
Lower fees and customized and innovative services have powered the growth of neobanks in the financial services market. It has transformed the rules of competition and changed customer perceptions of banking. Probably the most powerful rationale for rapid neobank adoption is the ability to provide services cheaper than brick-and-mortar banks. With minimal physical infrastructure and concentrated digital services, neobanks are not burdened with the overhead of maintaining a physical branch network. This eventually saves the model for passing on savings to customers by offering low transaction fees, foreign exchanges, or account management fees. Serving customers seeking a more equal and open-minded route to financial services, its clientele went from tech-savvy millennials to small business owners tired of the traditional bank charges. Such a reduction of fees creates customer loyalty and better finance management for the customers themselves, thus making neobanks quite attractive as an alternative to conventional banking.
In May 2024, Alliant Credit Union introduced SBL Edge, its new lending platform that focuses on small balance commercial real estate borrowers in the multifamily, manufactured housing, and self-storage industries. SBL Edge was conceived and built by industry veterans with immense experience in commercial real estate lending. SBL Edge executes operational efficiencies and unleashes deep industry knowledge to deliver unparalleled service.
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Integration of Advanced Technologies to Boost the Market Growth
Advanced technological integration shapes the course of the United States neobanking market, which is expanding at a rapid rate since it can support improved operational efficiency and higher customer satisfaction. Indeed, neobanks are driving the shift by leveraging advanced technologies such as AI, machine learning, and blockchain to reshape traditional banking models. Thus, AI and machine learning help neobanks to provide really customized financial services, from tailored investment recommendations to fraud detection in real-time, aside from automating routine jobs and reducing human errors. It makes the entire banking experience more efficient, secure, and user-friendly. In February 2024, Revolut launched an advanced scam detection feature to protect customers against card scams. Revolut’s brand-new AI-scam feature can help spot if a customer is being scammed, and hence break the spell of the scammer before they send their money to the criminal. Since testing was initiated, fraud losses from card scams at Revolut have fallen 30%, where money has been sent to take advantages of investment opportunities.
Furthermore, blockchain makes transactions more transparent and secure, further cutting costs due to intermediaries and, at the same time, increasing user trust. The nature of the technological changes is to smoothen banking operations and introduce new, innovative services that will meet the changing needs and preferences of customers. And as these technologies get further refined, they are likely to further distinguish neobanks from traditional financial institutions, bringing a diverse and technology-savvy customer base on board, and ensuring significant market growth in the digital age.
Savings Account to Dominate the United States Neobanking Market
Savings accounts are predominant in the United States neobanking market. This can be identified as a reason for dominance from neobanks that can place their initial focus on personal users or consumers rather than businesses. The cost-effective and user-friendly features usually attract personal users. Neobanks usually encourage personal consumers with features related to high-yield savings, low fees, and hassle-free digital experience. These low fees and hassle-free features are increasingly driving the consumer’s need for cost-effective and user-friendly banking solutions. Savings accounts are in high demand among neobank users due to the attractive interest rates, tiny maintenance fees, and ease of management with mobile applications. The features improve a host of common consumer pain points regarding traditional banking that charges exorbitant fees and provides limited access to digital tools. In 2023, GoHenry and Pixpay have now partnered with the United States savings and investing app, Acorns, to bring financial wellness to families worldwide. With nearly 6 million customers worldwide, this new union brings amazing innovation for our customers, enabling us to collaborate and move forward in innovating for the next generation toward a brighter future.
While neobanks have increasingly added business accounts to their services, the latter naturally tends to be relatively smaller in comparison. Business accounts would relate to invoicing tools, expense management features, or business loans, which demand a different set of requirements and compliance standards altogether. But while neobanks are making strong headways toward catering to such needs in businesses, the market for personal savings accounts remains a more developed and widely adopted segment.
West Region to Dominate the United States Neobanking Market Share
Various key factors drive the leading position of the Western United States. West has major technology hubs, such as Silicon Valley, that drive innovation and early adoption of digital financial solutions, accelerating the adoption of neobanking services. Coupled with its advanced and enforced digital infrastructure, which guarantees seamless access to online banking, the region has become a haven for neobanks. Furthermore, the West places great emphasis on fintech, supported by enormous venture and technology company investments. The combination of such factors puts the West in a competitive position for the growth of neobanking market, setting the trends and benchmarks for the remainder of the country, while fastening an already leading position in the market. In August 2024, Axos Bank is a nationwide subsidiary of Axos Financial Inc. and has earned several class-leading spots in various USA TODAY Blueprint, Best Of lists, including the top spots for Best Checking Account, Best Business Bank Account, and Best Personal Loan.
Northeast region is turning out to be the main force in the United States neobanking market as the region is among the major financial centers, with innovations and venture capital investments in digital financial services flowing from cities such as New York. The Northeast indeed has a very high population density in the urban centers, hence offering a great market potential for neobanking solutions.
Future Market Scenario (2024 – 2031F)
1. As digital transformation reshapes the landscape for financial services, the neo-banking pace is expected to increase. Neobanks will extend their effort in fostering financial inclusion by continuing extensive services to the low-income and underbanked segments.
2. Advanced analytics intends neo-banks to offer bespoke financial products and proactive financial management tools, meeting customer needs in the forecast period.
Report Scope
“United States Neobanking Market Assessment, Opportunities and Forecast, 2017-2031F”, is a comprehensive report by Markets and Data, providing in-depth analysis and qualitative and quantitative assessment of the current state of the United States neobanking market, industry dynamics, and challenges. The report includes market size, segmental shares, growth trends, opportunities, and forecast between 2024 and 2031. Additionally, the report profiles the leading players in the industry, mentioning their respective market share, business models, competitive intelligence, etc.
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