Just a few years ago, launching a neobank felt like building the future. With a sleek design, instant onboarding and mobile-native user flows, these platforms made legacy banks look obsolete. And that early optimism still echoes in the numbers: the global neobank sector is projected to grow from $148 billion in 2024 to $230.5 billion by the end of 2025.
Yet, the cracks are now showing.
In the U.K., long seen as a leader in digital banking, primary banking relationships with neobanks dropped from 6 percent to 5 percent within a year. That may sound minor, but it’s clearly about something deeper: Convenience alone doesn’t sustain user trust. And even major players haven’t escaped the reality check — HSBC’s Zing digital app lost more than $87 million and was shut down in early 2025 due to low adoption and an inability to stand out.
For fintech builders, the message is that a clean interface might win users, but infrastructure is what keeps them.
Why Are Neobanks Struggling in 2025?
Neobanks once thrived on sleek design and easy onboarding, but cracks are showing as users demand reliability and regulators tighten oversight. The next fintech wave is shifting from consumer-facing apps to resilient, API-driven infrastructure that embeds financial tools directly into existing platforms.
The Promise of Neobanks
For a while, the combination of cool design, faster onboarding and mobile-first flows felt like a breakthrough. This novelty made neobanks work. But over time, expectations changed, and the early playbook started to show its limits.
Why They Took Off
Neobanks took off for good reason as they solved real problems. They made it much easier to open an account, track spending or just be in control of your money. So, these institutions felt like they offered real progress compared to the experience people had with traditional banks.
They grew fast because they filled a tangible gap — digital-first banking for digital-native users. And that was more than enough to build momentum.
What Worked Early
Back in the day, good design and well-thought-out branding did a lot. These apps felt cleaner and more transparent. Perhaps most importantly, they often came with fewer fees. Under the surface, however, many were still pieced together from sponsor banks and third-party providers.
Sure, that worked for a while, but over time, users started asking for more: faster payments, better integrations and real support. This is where platforms started hitting their limits and things got more complicated.
Where Things Got Complicated for Neobanks
Regulation and Burn Rates
In early 2025, several banking-as-a-service providers lost access to their sponsor banks, cutting off tens of thousands of end users from their funds overnight. Structurally, this failure had little to do with UX or adoption. The real break point was in the back-end: The compliance mechanisms just weren’t built to hold up under pressure.
And now regulators are starting to pay closer attention. In June 2025, FinCEN gave traditional banks the green light to collect taxpayer information from third-party apps, signaling that trust is heading back toward firms with more control over the stack. In turn, Europe is raising expectations too thanks to PSD3, pushing platforms to prove they’re stable, secure and not flying blind.
Simply put, when the pressure shows up, it hits the back-end first.
Composability Creates Blind Spots
Clearly, as infrastructure gets more modular, it also gets more interdependent. The same flexibility that lets a platform launch quickly can make it harder to see where risks are buried.
This means that when one service breaks, whether it’s a sponsor bank, a KYC provider or a payment processor, the impact disrupts everything that depends on it. And because ownership is distributed across vendors, failure points are often invisible until something goes wrong. That’s the bitter truth: In composable systems, fragility never announces itself. It just shows up.
What Comes Next for Fintech
None of this means fintech is broken. It only means that the next wave won’t center on launching new apps, as the focus is clearly switching to building out infrastructure underneath.
Infrastructure Over Brand
Today, the real breakthroughs are coming from platforms that embed financial tools directly into the user experience. Compliance, payments, treasury and risk management are becoming modular and programmable — available through APIs that slot into existing products.
One of the clearest examples is Shopify. Sellers can now get instant payouts, manage balances, access lending and reconcile transactions, all without mascots or banking licenses. The result is that merchants get cash faster, with fewer intermediaries and less friction, without even opening a “separate” bank account.
Besides, time-to-market has shrunk dramatically. For example, take Walmart’s partnership with JPMorgan Chase in early 2025. Marketplace sellers now manage cash flow and receive payments directly through JPMorgan’s rails. There’s no extra interface or new app, just infrastructure quickly and quietly doing its job.
What Resilience Looks Like Now
In my view, the companies worth watching are the ones that treat infrastructure as part of product strategy from day one. They run internal drills, monitor dependencies closely, and build systems that make audits straightforward — and failure easier to isolate.
So, that’s where I see the real advantage in this market: not only in how fast something launches but also in how confidently it holds under pressure.
