The neobanking landscape is changing. Early challengers like Monzo now mimic banks on the high street. Revolut has expanded into a financial services provider of everything from bank accounts to crypto wallets, and new challengers from other markets are cashing in on customer loyalty, hoping to expand. FStech senior reporter Isaac Hanson explores how things have changed, and where they might go from here.

Last month, UK-based neobank Revolut finally acquired a full UK banking licence after years of delays, joining the ranks of challenger banks that look on the surface less-and-less differentiated from their high-street counterparts.

At the same time, payments companies like Wise and Klarna hope to translate customer loyalty for their current offerings into new streams of revenue, offering products akin to the current accounts and debit cards that brought the original tranche of neobanks to the fore.

As the promise of interest income, alongside technological advances, further blur the lines between FinTechs and traditional banking, FStech asks: how are neobanks differentiating themselves in 2026?

Neobanking began to be used as a term in the mid-2010s to describe a growing number of FinTech companies that offered banking-like services without having full licences. At the time, many of these companies operated more like FinTechs than traditional banks, with small, young teams, no physical locations and venture capital backing.

“The initial idea for most of the neobanks was to make money out of a better transaction account. Interchange fees were a big part of the play for many of them; they stayed away from building a balance sheet on purpose, at least in the UK and continental Europe,” Christoph Stegmeier, senior partner at consultancy Simon-Kucher, told FStech in an interview.

This decision was driven, at least in part, by the venture capitalists that provided funding, Stegmeier said. Large balance sheets create volatility, whereas transaction fees and add-ons like subscriptions or forex trading offer reliable income streams with lower day to day risk.

However, these revenues were not enough for most banks to achieve profitability. The rapid growth of these FinTechs allowed many, including the UK’s Monzo and Starling, to acquire banking licences within a few years of operation. This facilitated a refocusing on building balance sheets and acquiring interest income, which was the factor that ultimately brought cashflows into the green.

This was soon followed by revenue splits that remained close to high street banks: last year, interest income accounted for nearly 70 per cent of Monzo’s total revenue, and over 86 per cent of Starling’s. The industry average across all banks is between 60 and 80 per cent, according to Stegmeier.

Despite their growing similarities to traditional banks, however, neobanks have struggled to convince users to make them their primary financial institution. Even in the countries where users are most likely to use them as their primary account – Brazil, Turkey, Colombia and Mexico, according to Simon-Kucher’s latest neobanking report – the number hovers around 35 per cent.

This translates into lower deposit balance averages, creating a large discrepancy between account numbers and revenue; Simon-Kucher’s February 2026 Neobanking beyond disruption study suggests that one in five banking customers hold an account with a neobank, and they currently take two-fifths of new custom, but they hold only a five per cent revenue share.

Approaching from a different angle

Revolut has taken a different path. Its balance averages are even lower than its competitors, despite it being the most profitable neobank in the world. Estimates acquired by dividing annual reporting of balances by customer numbers suggests Revolut users have around £735 in their accounts at any given time, while Starling’s customers have close to £2,600 and Monzo’s over £1,200.

For Revolut, the real money is in fees. Only 21.6 per cent of its income last year came from interest despite high base rates driving record interest incomes in the sector globally. In fact, its proportion of fee-based income rose 4.2 per cent year-on-year.

Of these, card payment fees alone made up more of the bank’s total revenue than interest income, with the rest coming from subscriptions – Revolut offers four paid plans for individual users ranging from £4 to £55 a month – broking fees from its built-in stock trading feature, and foreign exchange (forex) interchange fees.

Revolut also offers e-sims in select countries, cryptocurrency onramps and a reward points scheme somewhere between American Express and a supermarket loyalty card.

Viewed this way, Revolut is not so much a bank as it is a financial services hub, and this may be to its benefit: according to its annual report, it has 11 different products that exceeded £100 million in revenue in 2025.

By achieving profitability with only a small portion coming from investment income, Revolut is well placed to benefit from its UK banking licence acquisition without facing the dangers of overreliance on central bank base rates. Ever since the Bank of England and European Central Bank raised their base rates of interest in response to post-Covid inflation, experts have been warning that the record banking profits generated as a result will not last.

Although continued global instability has so far kept rates well above the sub-one per cent figures they were at in the 2010s, diversified revenue streams provide Revolut with a larger safety net should these predictions come to pass while still letting it expand product offerings like mortgages and personal loans.

This opportunity seems particularly large in the UK, where its fee income alone is almost the same as Revolut’s global annual interest income, at £840 million and £891 million, respectively.

“Currently, you could say Revolut is over-penetrated on commission fee income, or you could say it’s under-penetrated on net interest income,” said Stegmeier. “What the licence will do is make growing deposits, selling loans and building and managing the profitability of a balance sheet much easier.”

The bank’s current loan book is small but growing rapidly. At the end of 2024, it sat at £1 billion, and grew 120 per cent to £2.2 billion by the end of 2025. With only around 3 per cent of the bank’s total revenue coming from loan interest according to its annual report, there is ample room for the bank to expand its exposure in the market.

Challenging the challengers?

There is also a new wave of challenger banks emerging. Rather than new companies or spinoffs from existing banks, these are the product of existing financial services providers expanding into full-service banking.

Within the last year, major FinTechs Wise and Klarna have expanded their banking offerings in the UK, both offering current accounts for the first time. This marks a shift in strategy for both companies, which began in low-cost forex markets and buy-now-pay-later, respectively.

When launching, Wise’s chief product officer, Nilan Peris, said that banks haven’t kept pace with what customers expect for their current account, and that Wise’s account offers features – including 3.26 per cent variable interest – that make it a “smarter” way to manage daily financial needs.

Wise’s co-founder and chief executive, Kristo Käärmann, added in the FinTech’s Q4 2026 financial update that “More and more people are using Wise at home or abroad for their everyday spending, for paying bills, for savings and investments. That’s why last month we formally launched our UK current account.”

Klarna is also positioning itself as an alternative to people’s primary accounts. In its 2025 fourth quarter report, chief executive Sebastian Siemiatkowski said that bringing the global customer base acquired through its payments offering to its wider banking services has been Klarna’s “clear plan” for a decade.

Leveraging established trust into wider adoption of banking services could be a powerful driver of revenue for both firms, but it has its limitations, Charlotte Wain, senior tax manager at accountancy HaysMac, told FStech.

“Rather than positioning themselves as full-service banks first, these players are building on existing ecosystems,” she said. “Klarna is leveraging its deep relationship with retail and ‘buy now pay later’ users, while Wise continues to focus on international spending and multi-currency functionality.”

She added that once users have chosen their primary bank account, they tend to stick with it, meaning the opportunities for Wise and Klarna to take major market share from existing high street or neobanks are limited.

This does not mean their new offerings will fail, however, as they are likely to be designed with this in mind. “Their debit cards are less about replacing a primary bank account and more about reinforcing everyday use cases where they already have gained customer trust,” Wain said.

Even expanding their customers’ use of these services a small amount could have a large impact on revenue: Siemiatkowski said in Klarna’s Q4 2025 report that customers who expand their product use beyond payments generate $107 per user, three times more than the rest of its customer base. Last year, that number grew by 101 per cent and now sits at 15.8 million.

If these new products are successful, they could offer a useful new source of income, and one that does not require large and consistent transaction volumes. However, there are risks associated with this expansion. Even if it does not detract from a focus on their core products, launching debit cards and current accounts is expensive, and without clear utility, it could backfire.

“The cost of card issuance, compliance and customer acquisition is significant, and without a compelling reason to make the card a primary spending tool, these launches risk becoming expensive brand exercises,” Julia Sutton, Paymentology’s head of growth, Europe, told FStech.

“The infrastructure exists to bring card programmes to market faster than ever, but infrastructure alone doesn't build habit. Sustainable differentiation means becoming indispensable, not just available.”

Additionally, while Wise and Klarna are currently both Electronic Money Institution authorised in the UK, neither are full-service banks, significantly impacting their ability to hold the large deposits that generate interest income.

As the UK’s neobank landscape continues to mature, it will become increasingly difficult for new players to enter the market. While it may not yet be impossible to imagine new disruptions, consolidating market shares around key players like Revolut and Monzo mean any challengers will have to think increasingly carefully about their positioning, and what they have to offer.

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