Was the rise of Neobanks a fluke?

The rate of digitization of the modern financial system has brought about ample opportunities for individuals and institutions to access financial services, make investments, manage their funds, etc. 

This trend has also greatly increased the number of people with bank accounts and the next stage of development in the banking sector has been making rounds among investors since the start of the 2010s - Neobanks.

Neobanks are fully digital fintech platforms that seek to provide a seamless, user-friendly financial service experience at low fees and innovate financial tools that may not be available at their legacy, full-service counterparts. 

Publicly-traded neobanks took the market by storm during the Covid-19 lockdown period, when hundreds of millions of people ordered online and digital banking was as convenient as ever. 

However, a noted divide between the success of Neobanks as investments and the actual consumer behavior has formed in 2025.

Stock performance VS Market share

The Neobank market is divided into publicly listed and privately held companies. For example, Wise is a LSE-listed company with a market capitalization of over GBP 11 billion, while the likes of Revolut, Chime and others, are privately held, with no exact date for an IPO. 

Therefore, we will use Wise as our example to highlight discrepancies between market valuation and real operational results.

If we look at the price chart of Wise plc (LSE:WISE.L), we can see that the stock has risen from GBX 630 in September 2024, to as high as GBX 1,100 in February 2025 - nearly doubling over the period.

Such rapid growth indicates that the market has priced in the future returns of the Neobank as of this writing. Conversely, rising interest rates, tightening household budgets, and economic uncertainty have adversely affected consumer spending.

Discrepancies of this magnitude are likely to result in a considerable correction in the future, leaving investors in a difficult position and holding on to overvalued shares. 

Another major factor to consider is that Neobanks have failed to replace full-service banking institutions. Rather, they fall considerably behind in terms of available capital and do not typically represent primary accounts for their users. This indicates that users view Neobanks as auxiliary banking apps, as opposed to tangible alternatives to major banks. 

The best Neobank for 2025

The mixed 2025 market presents challenges for users, as it does for Neobanks themselves. Choosing the one firm to become a long-term client can be challenging, as the competition is heating up more and more as time passes. 

In the prior section, we briefly overviewed the stock performance of Wise plc, which often ranks among the top-rated Neobanks to sign up with.

On the other hand, Revolut has been growing steadily, particularly among EU users. Since Wise is broadly more focused on international transfers, Revolut offers a more well-rounded Neobank service. For example, premium banking plans, while Wise offers additional features for freelancers and self-employed individuals. 

What does the future hold for Neobanks?

As interest rate hikes slow down, investors are likely to be more bullish on Neobanks, as consumers spend more and economic growth figures improve. However, structural issues with the economy, including low household purchasing power, high cost of living and low savings, mean that Neobanks have to navigate a challenging market landscape if they wish to survive past 2025 and actually fulfill the potential that is priced into their stock valuations. 

Furthermore, interest rates are likely to further increase in the coming years, as the manufacturing reshoring continues in the United States, which will put pressure on employers to increase wages across the board, which is further compounded by labor shortages in the country. Such factors also exist all across the EU and the UK, which makes the fintech market particularly tricky to navigate. 

Conclusion

The global Neobank market has been a major growth story since the 2010s, but has fallen under considerable uncertainty in 2025.

While interest rates are not increasing in the short-term, they have already risen considerably in the past 2 years, which puts pressure on Neobanks and other fintech platforms, while their investors look towards fixed-income markets for stable annual yields. 

The long-term future looks uncertain for Neobanks, as they have failed to dislodge full-service banks, which continue to dominate the financial services market, while implementing new digital services to compete with Neobanks. 

If interest rates continue to rise in the long run, Neobanks and their investors are likely to face difficulties, as most fintech companies are still in their early stages of development.