Are neobanks doomed never to be profitable? In 2018, an initial study of online banks conducted by the Autorité de contrôle prudentiel et de résolution had already addressed the question. Two years later, little has changed. Find out more.
2 million new customers in 2019
According to a new survey of some 15 neobanks carried out in 2019 by theACPR, the net results published by these players remain negative overall after several years in business. "Only a still very limited number of establishments manage to generate profit margins," notes the supervisor in its study.
Customer acquisition costs remain high. This is due to the fact that the basic services offered are free, and to the premiums paid on opening an account (80 euros on average). This costly strategy has nevertheless enabled neobanks to multiply the number of accounts opened by a factor of 2.5 in just 2 years. All in all, in 2019, these startups won over almost 2 million customers, a 75% increase on the previous year.
The study highlights that net banking income (NBI) is stagnant or even declining when related to the number of customers. In 2018, NBI per customer averaged 99 euros, after reaching 106 euros in 2016 and 101 euros in 2017. A very slight improvement in profitability has been noted among certain players. This is mainly due to lower costs linked to the amortization of major initial investments, and an increase in the number of customers.
A highly concentrated market
The neobank market encompasses players born with the development of the Internet (ING, Fortuneo, Boursorama Banque...), those backed by a physical network of bank branches (Hello Bank, BforBank), those combining an online offering with product distribution and part of the customer relationship based on a physical non-banking network like Nickel or Orange Bank, and pure mobile players like N26. To stand out in a highly concentrated market, neobanks are trying to lure users with attractive welcome bonuses and/or diversify their offers and functionalities.
These new players are gradually winning the trust of consumers and becoming part of their everyday banking habits. In this ultra-competitive environment, their viability depends on two main levers: their ability to acquire and retain new customers, and the need to turn them into active customers. Alongside profitability, the ACPR suggests that neobanks "develop their offering to meet changing customer needs and growing competition from BigTechs, as well as from mobile digital platforms" that offer several banking and financial services and products on a single medium.