Maybe neobanks will break even after all
Building a consumer-facing fintech company is expensive. And if you want to build one in a sector crowded by both incumbent companies and richly funded startups, it can be super expensive.
That was the lesson we learned in late 2020 by examining operating results from a number of neobanks.
Neobanks are essentially software layers atop banking infrastructure, offering consumers digital-first, mobile-friendly and often lower-fee banking services. The push to rethink consumer banking is a global effort, with neobanks cropping up in essentially every market you can think of. Private investors have shown up in droves to fund competing neobanks because they have the potential to secure users — customers — that generate revenues for long periods of time.
Investors have proven more than willing to fund huge investments in growth and product at many neobanks, leading to steeply negative operating results at the unicorns. In short, while American consumer fintech Chime has disclosed positive EBITDA — an adjusted profitability metric — many neobanks that we’ve seen numbers from have demonstrated a stark inability to paint a path to profitability.