With over 90% of the GCC population connected to the internet, neobanks that offer a wide range of online banking services are expected to experience accelerated growth in the region to reach $3.45 billion in market size. here 2026.
Globally, the neobank market size is expected to reach $2,048.53 billion by 2030, growing at a CAGR of 53.4% between 2022 and 2030.
Factors such as faster loan approval and funding process, compared to traditional banks, along with low interest rates through banking apps, are driving the market growth, according to fintech experts. Increase in technological advancements, such as artificial intelligence and IoT, in online banking platforms is also expected to boost the market growth over the forecast period. The growing popularity of mobile applications for making international money transfers and payments online is also propelling the growth of the market. Governments in various countries are trying to promote Internet services in rural areas.
Huge impact
A Boston Consulting Group report shows that neobanks, often referred to as challenger banks, have had and will continue to have a huge impact on consumer credit, the economy, and society at large. In the GCC, which has one of the highest connectivity rates in the world with over 90% of its population connected to the internet, far exceeding the global average of 51.4%, the next-generation digital banking space should grow at a steady pace. phenomenal pace, especially as nearly two-thirds of the population are expected to have 5G connections by 2026.
“With GCC regulators indicating they are ready to challenge existing standards and accelerate the development of policies and frameworks to foster an enabling environment for fintech advancements by easing requirements for new entrants to the market enter, launch and promote innovation, the sector is expected to rise ahead,” BCG said in a report.
The sector’s valuation is expected to reach $3.45 billion by 2026 due to a boom in the growth rates of digital payments and digital remittances, BCG said in a report.
The BCG report looks at the changes in the regulatory landscape combined with the massive adoption of the Internet and smart technologies as the main reasons for this growth spurt.
The report shows that neobanks have had and will continue to have a significant impact on consumer credit, the economy and society in general. For neobanks, characteristics that have often defined success include digital and mobile-centric services, exceptional user experiences, cloud-based platforms with a modular architecture, a lean and agile technology-driven culture, and the creation of brands with which users have an emotional connection.
“Internet-based digital finance has emerged at a time when proponents of change behind the ‘New Internet’, or Web3, are advocating for user-centric innovation – where the end user is the ultimate arbiter of evolution and viability of a platform.. And we see that translate directly into neobanks. The industry is expected to be valued at $3.45 billion by 2026 as a direct result of booming growth in digital payments and digital remittances,” said Bhavya Kumar, Managing Director and Partner at BCG.
“Rapidly developing”
“The GCC fintech sector is still early in terms of fintech maturity, but growing rapidly. As regulators ease barriers to entry, new businesses and established players seek to capitalize on the demands of a young, highly connected population who want convenient, on-demand access to their finances, and are acutely aware what to expect in terms of sophisticated services. user experiences,” he said.
Global examples of how neobanks have built such differentiated digital-only propositions provide important insights into how financial sector market entrants can capture market share in the region. BCG’s Fintech Control Tower report, which monitors and maps the latest industry trends, tracks more than 26,000 fintech companies globally and reports a more than 200% increase in the number of neobanks since 2015. In 2021 alone, equity raised by fintechs globally was around $131 billion.
“Given that traditional GCC banking branches offer one of the highest rates of return on equity in the world, the proliferation of digital-only branchless banking, favored by a young, highly connected and digitally savvy population, can only enhance the significant returns generated,” said BCG Director Martin Blechta.
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