According to a new report by Finbold, 43 new challenger banks have launched this year, a 17% increase from the previous year. Despite the global financial challenges, the fintech industry continues to progress, reports Finbold.
While some fintech companies have paused hiring and even been forced to downsize their staff, the challenger bank sector has witnessed a wave of new businesses successfully entering the fintech market. The increase of 17% may not seem like anything significant but bearing in mind 2021 was heralded as a pivotal year for progression in fintech and rising investment, it is a considerable rise.
In 2021, there were a total of 248 challenger banks worldwide. Today, as we near the end of Q4, there are 291. Further data suggest that Europe is leading the trend as the region with the highest increase in challenger banks. Between October 2021 and October 2022, the number of new digital banks in Europe increased by over 27%. This figure makes Europe a global leader in digital finance, with a total of 97 active challenger banks.
According to recent reports, a well-structured regulatory framework enabling emerging businesses to progress was viewed as the main reason why Europe’s fintech market has expanded so quickly over the last year. Streamlined passport regulations between EU nations are also considered a contributing factor.
Despite being regarded as a global leader in fintech, the US ranked second to Europe in new digital bank startups, with 10 new challenger businesses launched over the last year, bringing the total figure to 73 for North America. Elsewhere, APAC and South America saw three new banks launch, and MENA saw four new challenges in the fintech market.
The Finbold report suggests that the current global climate is becoming far more favourable toward fintech offerings. The report explains that customers are driving this transformation, especially the next generation of users attracted to digital finance because of its accessibility, affordability and high-tech offerings. Digital banks can provide various services such as free accounts, crypto services, overdraft protection and low minimum deposits. A growing number of innovative applications that make mobile banking very user-friendly and accessible to customer requirements reinforce these services.
Finbold explain that economic uncertainties have, in some cases, been detrimental to digital finance, as they cannot navigate challenging market conditions compared to established businesses. Nevertheless, fintech businesses can remain stable if they meet customer needs by offering specific services that customers require during these difficult times. Finbold state that with challenger banks experiencing growth during such a critical time, a global recession could present another opportunity. The businesses that can rise to the occasion and deliver the services that support customers through these difficult times will inevitably progress further.
