Challenger banks and neobanks started riding high in 2014. Neobanks gained instant popularity with their online, legacy technology-free banking. The UK leads the neobank segment; UK-based neobanks have almost 20 million customers. Over the past few years, FinTechs and neobanks focused on addressing shifting customer demand and targeted needs of SMEs—such as cross-border and B2B payments, SME lending, working capital optimization, cash flow management, KYC, invoicing, and accounting—have emerged. The neobank segment is also now a key focus for VCs.

Europe is a neobanking hotspot. In 2020, the region accounted for 30% of global neobanking revenue ev …