Are neobanks a rising competitor to wealth management?

The global neobanking market was valued at $143.2bn in 2024 and is expected to reach $3.4trn by 2032, according to Fortune Business Insights. While this will bring more competition for the digital banking sector, wealth management could also be impacted.

While many wealth management firms might not see neobanks as a threat, given they were initially competing with traditional banks, their services are evolving and retail investing is an area many are looking to enter.

Friedhelm Schmitt. Founder & Co-CEO of fincite, noted that neobanks are a rising competitor for wealth management, one that should no longer be ignored. He said, “Neobanks are increasingly relevant players in the wealth management space. For a long time, they were underestimated, seen merely as providers of “simple” banking services.

“But neobanks aren’t trying to replicate traditional advisory models. Instead, they’re redefining the customer experience with new dimensions: mobile-first, seamless, and embedded into everyday financial life. Their real strength lies in accessibility and engagement, especially with digital-native generations.”

This is what makes them such a major threat for traditional wealth management firms. Many of these established firms are still heavily reliant on legacy technology, costing them speed, agility and efficiency. Many of these firms are reliant on personal trust and deep expertise, Schmitt noted. But neobanks are pushing the sector towards being more scalable, user-centric and technologically enabled.

Fredrik Davéus, CEO and co-founder of Kidbrooke, added, “Financial services lean on trust and capabilities. Trust is a process which takes time to build and for the majority of customers a neobank is not an option in the short term. Also, people prefer a one-stop shop.

“However, in the long run, when the capabilities of neobanks increases, and more importantly, trust is also built, the neo banks will likely be in high competition due to their superior technology. When this happens, traditional companies need to be able to compete from a technology and user experience point of view, which will then be the new shape of the sector.”

The growth of neobanks

As neobanks grow, there is a rising trend of them shifting to become financial super apps. As part of this, retail investing is an obvious route to expand into. For instance, UK neobank Monzo released its own investment features for clients in 2023, while German neobank N26 launched investing tools in January 2024. As more neobanks continue to grow, it is inevitable that more will look to embed retail investing into their services.

Schmitt noted that there is currently a rise in financial platforms that are dissolving the boundaries between banking, investing and advisory. He said, “These players integrate investments into daily financial behaviour, often combined with subscription models or loyalty programs. Their first focus is on digitizing and scaling the parts of the value chain that are technically automatable. Human advisors are still involved where complexity or emotional context require it but that’s increasingly the exception, not the rule.

“This evolution forces traditional providers to rethink their entire model from rigid value chains to modular, technology-driven architectures. Scalable infrastructure is the foundation; true value-added services are built on top. The future belongs to platforms that unite intuitive UX, real-time financial data, and personalized advice, while also meeting high regulatory and fiduciary standards.”

These capabilities are very appealing for tech-savvy younger generations. As the generational wealth transfer continues, these generations will have more capital at their disposal to invest and the firms that offer greater autonomy, transparency and seamless digital experiences could be the big winners. Schmitt said, “The generational wealth transfer is not only a capital shift, it’s mainly a mindset shift.”

He added, “Platforms that offer personalized financial journeys, from micro-investing to estate planning, are ideally positioned to serve this group.” While some firms might want to wait until the next generation of clients will have more wealth, there is no guarantee they will use the same firms as their parents and could opt for companies that supported them over the years.

That said, offering a slick digital app is not enough to ensure success. Schmitt noted, “But the bar is high: financial lives are more complex than ever. Asset classes have exploded in variety, strategic asset allocations are more sophisticated, and product access plays a major role in portfolio performance. These clients don’t just want a slick app, they want comprehensive guidance. The challenge is to deliver mass-personalized advice that’s relevant, yet scalable. It’s the paradox of modern wealth management: making deeply personal support available to millions.”

Pros and cons

Schmitt highlighted a number of pros and cons for investment services being offered through neobanks. On the pros side include seamless onboarding and integration with daily banks, low entry barriers, transparent pricing, high engagement via gamification and behavioural nudging, and strong appeal to digital-first and younger clients.

As for the cons, these are limited product depth with often ETF-only portfolios, lack of human advisory for complex or life-changing decisions, risk of oversimplifying investing, and fragile trust during volatile or uncertain markets.

Davéus also offered some pros and cons. He said, “The pros are often the superior user experience, the cons are not being a one-stop shop in required products and features. Also, generally traditional companies have more trust, especially for those not belonging to the younger generation.

Evolving over the years

Looking through the crystal ball into the future, Schmitt believes the market is moving towards what he calls the ‘trusted advisor platform’. This is a model where data aggregation, goal-based planning and real-time advice converge to a seamless, personalised user journey.

This will provide the client with experiences that feel deeply personal and fully digital. However, the success of this will rely on three core capabilities. First is, data aggregation, with a complete 360-degree view of each client’s financial life. Goal intelligence is second. This will help understand the client’s financial and life goals across socio-demographic dimensions. Finally, AI-driven mass personalisation, delivering context aware recommendations and nudges in real-time.

“This will be wrapped in new engagement models: subscriptions, loyalty programs, and outcome-based pricing structures that align provider and client incentives. The winners will be those who master both trust and technology, delivering simplicity without sacrificing depth.”

On a final note, he concluded, “Wealth management is no longer a luxury, it’s becoming a digital habit. The real disruption isn’t better interfaces, but better integration: of data, advice, and personal relevance. Those who understand this shift won’t just manage wealth they’ll shape financial behaviour.”