Challenger Banks are Dead, Long Live Challenger Banks!

I see recently lot of discussion and questions out about challenger banks / neobanks - whether they are mainstream or targeting a niche segment. Question about their viability overall (especially if they're a niche player), or if they can even reach sustainable profitability?

Chime , Revolut , N26 (Europe, exited US), Dave and MoneyLion (can they even reach profitability), Varo Bank (can they make it), Daylight (Acquired by Atlas) (closed doors), Kinly (acquired by Greenwood) (sold to Greenwood vs shutting down), Spiral than has shut down its B2C offering, how many US teen banking fintech out (over 10...).and the list can go on and on.

There was massive funding into neobanks and challenger banks till end of 2021 when clouds were already there end of 2020 for those who wanted to see them. Challenger bank funding plummets in 2021 to $14B (over 128 deals), to $4.3B in 2022 (77 deals) and $0.1B in 2023 so far (8 deals) - CB Insights data.

Does it mean that challenger banks / neobanks are failing / going to fail ? Is there niche way the right approach?

I just want to share an article I wrote in Forbes in July 2021 where I was sharing a 5 years progress report on challenger banks and what could come in the future. I believe this should be of interest especially in the skepticism that is spreading now.

Among other points that I wrote back then:

- "challenger banks have struggled to turn large user bases into a profitable business model"

- "some investors are starting to question how sustainable challenger banks are and how the growing response from traditional banks impacts their long-term future".

- "Community banks and credit unions can learn from this approach by taking a hard look at their own user experience. Where can they enhance their products and service levels to match or exceed the experience provided by challenger banks?"

- "Interest-based, interchange, loans and fee-based services can all provide a healthy path to profitability." vs interchange fee & freemium business model only ...

- "user experience and interchange volumes alone won’t drive the value required for either consumers or account providers"

- challenger banks and traditional banks will both need to figure out the best mix of products and services to grow over the next decade. The winners will be those that best meet three standards: Is it relevant to the customer? Are the fees transparent and fair? Is the user experience simple and ubiquitous?"

More thoughts shared back in July 2021 through this link ??????https://www.forbes.com/sites/forbesfinancecouncil/2021/07/21/challenger-bank-five-year-progress-report/

I love challenger banks / neobanks and I believe there is a place for them. Back in 2000 I was part of the founding & management team of the 2nd generation of challenger bank and we built from scratch a challenger bank that we made profitable within 4 years, and with over $20B assets within 8 (with debit card, credit card, wealth management, lending, mortgage, life insurance, trading offering!) and still in operation today with over $35B in assets - Fortuneo .

But there is a need today for the new wave of challenger banks / neobanks to revise their roadmap and get ready for what's next for them and Agora (Financial Technologies formerly Agora Services) is here to power them.

Challenger Banks are dead, long live the Challenger Banks !

Arcady Lapiro

CEO & Founder Agora (Financial Technologies formerly Agora Services)

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