Rising to the challenge: the next iteration of neobanks

Neobanks are currently grappling with a changing macroeconomic landscape, increased competition, new regulations and growing their customer base. To succeed, they need to double down on what made them successful in the first place: customer-centricity, speed to market and continuous innovation.

Undoubtedly, choosing the right technology platform will prove critical to their future success. The smartest teams aren’t wasting time rebuilding basic, or what we call “table-stakes”, features. Instead, they’re buying off-the-shelf solutions and focusing their internal resources on what truly differentiates them. 

But they also need to adapt their strategy to adapt to the new environment. For example, the recent increase in interest rates has been an impetus for revenue models to evolve. 

Many neobanks have been built on revenue generated from interchange fees and transaction volume. And while higher interest rates have improved margins, introducing deposit spreads as a new revenue lever, relying solely on interchange fees or interest income simply doesn’t scale in the current macroeconomic environment. It’s a risky foundation for long-term growth.

Instead, sustainable profitability will come from low-fee, personalised, advice-rich models that strengthen long-term customer relationships and build trust. As such, neobanks should look to diversify through meaningful, value-add services, such as subscription bundles that combine financial tools with identity protection, contextual lending, embedded finance, or monetising their infrastructure via a banking-as-a-service solution. 

Hyperpersonalisation

But the real differentiator goes beyond the services offered and stems from a neobank’s ability to experiment, understand true unit economics and iterate in real time. Such agility is essential in a climate where both market dynamics and customer demands are evolving rapidly.

Flexibility is also critical for neobanks to maintain their competitive advantage and truly differentiate themselves in an increasingly crowded marketplace, as traditional banks accelerate their digital modernisation efforts. Challengers need to continue to iterate rapidly and home in on specific customer needs – it’s no longer about broad, horizontal growth, but crafting hyper-targeted, context-rich journeys that evolve constantly.

As such, neobanks shouldn’t aim to be everything to everyone. The ones that succeed will be those that engage deeply with customers, solving their personal problems with precision and faster than competitors. 

Banking in compliance

As digital-first banks respond to regulatory changes, balancing compliance requirements with the need for innovation and customer-centric product development is often cited as a challenge. However, regulation and innovation aren’t counterposed. For example, the UK’s Consumer Duty, like other forward-thinking regulatory frameworks, should be viewed as a natural extension of what good product teams – which embed compliance into their development culture – already aim to do: deliver fair, transparent and outcome-driven experiences.

Importantly, Consumer Duty shifts the focus from box-ticking to outcomes-based accountability. It requires firms to actively monitor, test and evidence how their products, services, and communications deliver positive customer outcomes. This means digital journeys must be not only efficient, but also fair and easy to understand. Subscription models, freemium tiers and embedded finance offerings must deliver real value and avoid misleading complexity.

At Plumery, we believe that technology is a powerful enabler in this space. With the right platform, neobanks can run customer journey analytics to flag drop-offs or friction points, simulate fees to ensure pricing is fair and transparent, and test new features safely in production-like environments. Product teams can be confident that they’re building for sustainability and customer trust.

Reaching new customers

To truly compete with incumbents, neobanks are looking to expand their customer base beyond digital-savvy millennials and Gen Z to include more traditional banking demographics. Their strategy should be to improve products so that they work for everyone.

Clearly, the idea that Gen X and boomer customers don’t want digital banking is outdated. They may not be digital natives, but they are digitally active. Importantly, this segment values utility and wants something that works, saves them money and gives them control, particularly in light of the cost-of-living crisis. Many are looking for empathetic design and human support when they need it most.

The cost advantage of digital banking – no branches, leaner teams and a modern tech stack – remains key. It enables neobanks to offer improved interest rates, more competitive foreign exchange rates and smarter financial insights. Removing friction is essential to reach broader customer demographics.

Successful challengers have moved beyond the ‘nice app’ phase to deliver real substance: simplified navigation and in-app customer service with human support, as well as products that align with later-life financial priorities, such as easy-to-use investment tools, automated retirement savings plans, health expense tracking, and insurance bundling options. These features help people make better financial decisions, regardless of age.

In future, neobanks should lean into data. They should constantly test how different customer segments use the product and adapt onboarding, messaging and features based on observed behaviour. Ultimately, it’s about using data and technology to create empathy at scale.