EU Neobanks Lean on Innovation, Consolidation to Bolster Growth

mobile banking

In the early days of Europe’s neobank revolution, the continent’s 750 million+ inhabitants provided what felt like an unlimited pool of customers for a generation of pioneering digital banks across the continent.

And while the gold rush isn’t over yet, recent developments in the sector suggest that the continent’s new-school digital banks are aware of a looming saturation.

As the marketplace looks ever more crowded, neobanks appear to be pursuing two strategies to sustain their growth: consolidation and innovation. Although the two avenues are not mutually exclusive, they indicate two distinct trends emerging in the space.


In the emergence of any new market, the story typically arcs from rapid growth and seemingly endless space for new entrants to increased consolidation via acquisitions and mergers.

Among Europe’s challenger banks, there seems to be a transitioning from the proliferation phase to the consolidation phase of market expansion. For example, in March, Norway’s Lunar announced that it was acquiring Finland’s Instabank.

The move is a smart one. Not only does Lunar gain Instabank’s 60,000 customers as a result, but it will also be able to incorporate Instabank’s technology into the Lunar app and give the company a key strategic foothold in Finland.

In a statement at the time, Lunar’s CEO Ken Villum Klausen said that the merger presented an opportunity for the bank to “challenge, innovate and build a stronger Nordic entity that will benefit our customers.”

Read more: Challenger Bank Lunar Plans $146M Acquisition of Instabank

For Lunar, the decision to focus on subregional expansion rather than ambitious pan-European growth makes sense in light of existing economic, cultural and infrastructural ties between the Nordic countries. As Klausen told PYMNTS in a recent interview, the Nordic region presents “massive opportunities” in payments, banking and cryptocurrency.

And when it comes to building a more continent-wide user base, Lunar now has the infrastructure and license in place to offer euro-based banking services.

Watch interview: Lunar Uses Digital to Dislodge Nordic Incumbents and Gain Banking Market Share


In another example of a takeover aimed at bolstering a neobank’s market reach, Bunq’s acquisition of expense management app Tricount in May enabled the Dutch neobank to add the Belgian startup’s 5.4 million users to its existing base.

Related: Neobank Bunq Acquires Belgian FinTech TriCount, Adding 5.4M Users

Ultimately, however, Bunq purchasing Tricount may prove to be about more than generating leads out of a free app. As a neobank that has forged much of its success out of constant innovation, Bunq now has the option of integrating Tricount into its own app, perhaps even using it to enhance the functionality of the native Bunq bill-splitting feature.

Whether this is the direction the company intends to go in is yet to be seen, but it would conform to the trajectory of the Tricount app so far, which has emphasized ever-more embedded payment options for users. It would also align with Bunq’s customer-first, solution-oriented approach to banking.

As Ali Niknam, Bunq’s founder and CEO told PYMNTS in March, “we try to really understand what our users want and need and try to surprise and delight them by applying technology.”

Learn more: Bunq Out to Improve ‘Suboptimal’ Service Provided by Traditional EU Lenders

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