Neobanks, the digital disruptors of the fintech world, will see the number of US account holders reach 20.2 million by the end of 2021, more than double the number just two years ago, according to our inaugural Insider Intelligence forecast for digital-only banks. Neobank Chime, which was founded in 2013, is well ahead of its competitors. It will hold steady as the industry leader, but there will be a shift this year for the No. 2 spot.

Chime to drop “bank” from its promo items: The neobank reached a settlement with a California regulator that took action against it for not having a license—but the ordeal may spur more challengers to acquire banking charters as a way to build trust with customers.

Google’s update to Google Pay includes enhancements to its Google Plex bank account—as big tech companies dive into banking, it jeopardizes the value proposition of digital-only banks like Chime and Varo.

US state regulators: Chime agreed to stop referring to itself as a bank in its marketing materials, per a settlement with the California Department of Financial Protection and Innovation that was dated to March. The state regulator took legal action against Chime in 2020 because the neobank was likening itself to a bank without having a state banking license.

Neobanks like Chime and Varo will grow by nearly 19 million US account holders between 2021 and 2025, per Insider Intelligence projections. By the end of 2025, close to 40 million US adults will hold accounts at digital-only banks. More like this:. Report: The Banking Digital Trust Report 2021. Article: Varo Bank launches cash-back rewards in strategy pivot.

In the US, native neobanks like Chime and Varo will offer stiff competition.

Popular US challengers like Chime and Current seek to pick off disillusioned incumbent customers through enticing overdraft protection offerings—with the latter neobank likely passing up over $100 million in overdraft charges. High fees have long been the Achilles heel of large institutions like PNC, but its latest solutions could weaken one of the neobank industry’s most effective value propositions.

Current and Chime have introduced products like an early paycheck feature that undercut prohibitive charges common at banks.

Fellow neobank Chime, in contrast, is not licensed and recently agreed to stop calling itself a bank after a California regulator took action against it. Varo’s partnership with BlackRock underscores how it plans to achieve primary banking status with customers.

For context, Chime, which is the largest neobank in the US and one of the biggest globally, is estimated to reach only roughly half that number by the end of this year. Nubank CEO, David Velez, declined to confirm which countries were currently in its expansion sights—but its recent hires suggest it could be gearing up to expand significantly beyond its core market in Brazil.

Potential winners include US-based challengers like SoFi, which is planning to go public by June 1; Varo, which received a national banking charter last September; and Chime, which recently closed a $485 million funding round.

Applying for an account with Chime, the largest US neobank, for example, took us under 2 minutes—about half the time of some incumbents. Other points of friction that digital challengers bypass include diverting online applicants to a call center.

US neobanks have netted enormous funding rounds over the past two years—and the largest, Chime, was privately valued at $14.5 billion this fall.

Clair’s solution joins small-dollar lending options from FIs including neobank Varo’s Varo Advance and Bank of America’s Balance Assist, as well as similar early wage access offerings from neobanks Chime and Current. Clair is spearheading its customer acquisition efforts with early wage access—a sidelong approach to becoming a banking services provider.

Digital-only neobanks, such as Chime and Varo, were born online and have no legacy technology infrastructure to drag them down—but also no branches to fall back on. For that reason, they have been forced to focus on their digital customer experiences, including account opening.

Crypto trading is Venmo’s latest in a slew of new features that move it closer to competing with neobanks like Chime or Varo—even though it eschews the label and prefers to call itself a “digital wallet.”. Venmo rolled out a credit card in October in partnership with Synchrony, and in January unveiled mobile check cashing, available to debit card or direct deposit users.

Some of the most visible US neobanks—like Chime and Varo—have been operating in the country for the better part of the last decade. Operating exclusively in North America, Chime has an estimated 12 million+ US customers and has indicated it would consider a national banking charter.

By selling its video features, Zoom’s betting consumers have gained a long-term appetite for video communication, and that its product’s position as the industry standard is strong enough to win partnerships with developers over competitors like Amazon Chime.

Meanwhile, Chime has said it is considering applying for a national charter, and Klarna—which is actively expanding in the US—is already chartered in Europe. Given the significant amount of funding each has at its disposal, following SoFi’s strategy of scooping up a smaller bank could greatly accelerate their banking ambitions in the US.

The last decade also saw the slow but steady rise of online-only neobanks, like Chime and Varo Money, that by nature are digitally savvy. These factors are leading incumbents to accelerate digital innovation as part of their strategy to adapt other channels to an increasingly digital market.

Current and Chime, for example, introduced products like an early paycheck feature that undercuts the prohibitive charges common at banks.