Since 2017, neobanks have been multiplying on the French market. According to a study published by KPMG last January, there are now around 30 of them, with over 3.5 million active accounts, 2.5 times more than 2 years ago. While the profitability of these players is improving, there is still a long way to go, according to the ACPR.
Negative net income
While they're attracting ever more customers, neobanks aren't always making money, reveals an ACPR study released on June 19, 2020. Among the players capturing the most customers in France: Nickel, N26, Orange Bank, and Lydia. They account for nearly 78% of open accounts.
Despite their success, neobanks are still unable to generate positive net results. This is particularly the case for establishments that subsidize new customers with welcome bonuses or sponsorship offers. In its report, the supervisory authority states that of the 15 brands studied, only one or two are profitable.
Profitability depends on business model
In 2018, neobanks' average deficit was 30 euros per customer, compared with 40 euros 2 years earlier. Their financial results are therefore improving slightly over the years.
The banking supervisor points out that profitability depends on the business model followed by neobanks. Some players, particularly neobanks that are subsidiaries of traditional banks, opt for a "defensive " strategy, focusing more on customer retention than on profitability. Others are trying to be taken over by an established bank by offering innovative products and posting rapid sales growth. Finally, a third strategy consists of aggressively proposing a range of services in order to rapidly capture a large proportion of customers, and then increasing rates or basic services with a premium offer.
Transforming the customer into an "active" user
To achieve profitability, neobanks must succeed in transforming their customers into "active" users. Indeed, the ACPR points out that almost all of a neobank's NBI (net banking income) is generated by just 20% of its customers. A number of players, such as Orange Bank, have adopted this strategy, focusing on "value" customers.
In its study, the ACPR notes that while neobanks are still struggling to become profitable, they are gaining in legitimacy every year. Their potential is real, and there is no shortage of investors. Last January, for example, Lydia raised nearly 40 million euros.