Looks like (some) neobanks will be okay after all – sure naira

The fintech financing boom of the past few years has seen huge amounts of capital flowing into so-called neobanks, digital finance companies that offer banking services to markets in general and niche markets.

The overarching idea behind the push made sense: Many traditional banks are IRL first and digital second, and their physical way of doing things caused costs that were passed on to consumers. So why not build a new bank, a neobank, that uses technology to expand a lean workforce, eschews buildings and instead passes on savings to customers?

Using the systems of some existing regulatory-ready banks, neobanks could thrive cheaply and quickly start collecting revenue – thanks to the power of interchange fees – in the form of small slices of customer spend. It was honestly a pretty good idea, and like any other idea, it attracted a large number of founders and funders.

But after a period of epic fundraising and a few exits, sentiment against the model seemed to have shifted. How many neobanks could the market really support? Had some of them become too niche in their work to fine-tune the market and fine-tune their products?