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.

In this section, we’ll dive into the strengths, weaknesses, and long-term risks for each of the four largest neobanks in the US by account holders, as of May 2021: Chime, Current, Aspiration, and Varo. Chime. Chime is the neobank to beat. Founded in 2012, Chime boasts 13.1 million US users.

US neobank Chime raised $750 million in August, achieving a $25 billion valuation.

Current led the category by supporting three of six tools, while Chime and Aspiration tied for second with two features each. Account management features, which cover banking basics, were the best supported in our study. Neobanks offered at least four of the category’s seven tools, while the majority also supported the three most popular ones. Chime and Current prevailed with 77 points each.

Incumbent banks have been making changes to their overdraft approaches—even as neobanks like Chime and Varo have long promoted customers’ limited exposure to fees as a selling point. What comes next? To make up its lost revenue, Capital One can choose from among several options, based on reports from Raddon and Capco:. Adding income via premium offerings.

This strategic duality reflects Revolut’s position in the US as a foreign entrant up against stiff competition from both native incumbents like Chase and homegrown neobanks like Chime and Varo. To stand out from competitors, Revolut will need to make its offerings as attractive and frictionless as possible. Hiking the caps on fee-free services is a strong start.

Chime is a major US-based neobank and, per Insider Intelligence forecasting, will be the biggest by customers: it’s slated to jump from 13.1 million in 2021 to 22.7 million in 2025. However, Chime’s bulk doesn’t cross international boundaries; its expected growth is fully domestic.

Chime, based in the US, disclosed in September 2020 that it had a profit when measured by EBITDA, per TechCrunch. The big takeaway: Nubank’s milestone shows that its strategy of initially focusing on user scale before shifting gears to monetization has paid off at home—and it could replicate that strategy abroad.

For example, Chime relies on Stride Bank and The Bancorp Bank to power its accounts. Retail giant Walmart has jumped into retail banking with a demand deposit account (DDA) offered in partnership with Green Dot. That said, even in an environment full of reassessments of how banking works, Omarova’s proposal is likely a step too far for a majority of senators, which could sink her OCC nomination.

These players include neobanks like Chime, along with incumbents such as Bank of America, Fifth Third, and PNC. Meanwhile, digital-only bank Ally has gone further by dropping overdraft fees entirely. Legislative: A new state law in New York requires banks that maintain checking accounts to pay checks in their order of receipt.

Neobanks such as Chime, Current, and Varo won’t have to confront a behemoth with the digital prowess to cut into their digital-only value propositions. Banking as a service (BaaS) companies that offer front-end solutions have more reasons to be wary: The tech company may launch its own offering for their own small-bank customers.

If PayPal can enmesh even an eighth of its gargantuan user base—403 million as of Q2 2021—in its web of banking services, it would have more than triple the number of banking customers served by leading US neobank Chime (13.1 million, per Insider Intelligence estimates).

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.

Varo’s biggest US competitor, Chime, announced in August that it raised $750 million in a Series G funding round that spiked its valuation to $25 billion. The big takeaway: Sky-high fundraises and valuations raise expectations for neobanks. While it’s not the biggest US neobank, Varo’s national banking charter gives it an edge in its home market. Attaining this charter wasn’t easy.

The features are being offered by neobanks like Chime and Varo, along with incumbents such as PNC and Fifth Third Bank. The bigger picture: BofA’s product reflects a growing trend by established banks, blunting what has been a competitive advantage for digital challengers. In recent months, incumbents have taken actions against the fees:.

It’s not alone in the race. An influx of new BaaS entrants indicates the emergence of an industry to underpin embedded banking.

Revolut’s biggest US neobank competitor, Chime, revealed in September that it turned a profit when measured by EBITDA, according to TechCrunch. Revolut broke even in the month of November 2020, but broadening its product suite to include more revenue-driving offerings can help it sustain those profits—and prove that it’s capable of monetizing its enormous client base.

Chime is expected to reach 20.2 million account holders by the end of 2021, and Current is forecast to more than double its user base to 8.4 million by 2025. So while this latest funding round gives Revolut the firepower necessary to introduce its product suite to new geographies, in an important market like the US, it may arrive too late to the party.