Challenger banks are expanding fast. They offer digital banking that is simpler and more convenient than many traditional options.
Strict rules, slow economic growth, and compliance checks make the European market harder, but major players are still moving forward.
Global leaders like Nubank and Revolut set the pace, showing how digital-first models can scale.
Challenger banks have changed the global financial world in the past decade. They have pushed old banks to upgrade their services and forced regulators to keep up with new digital models. A recent commentary by Morningstar DBRS shows how fast these digital banks have grown. Europe’s top neobanks have increased their balance sheets 5 times in the last 5 years. Their fast growth, new market entries and expansion into products like credit have also led to tighter checks, especially around anti-money laundering rules.
Even with these challenges, digital banks around the world continue to expand and shape the future of finance. Here are the banks leading that change in 2025.
Varo Bank, based in San Francisco, became a major name in fintech in the US when it earned a national bank charter in 2020. It was the first American challenger bank to achieve this. Varo moved from relying on banking partners to becoming a fully licensed bank. Today, it focuses on digital-first banking and financial access for wider communities. This marks a shift in the US toward greater acceptance of banking without physical branches.
OakNorth Bank in London has made a strong impact on the SME lending market since 2015. It centres its services around mid-sized companies and reached profitability in its very first year, something few challenger banks achieve. OakNorth now also provides tech tools to other financial firms. Being part of Europe’s challenger bank space, it also deals with rapid growth, strict oversight and slow economic trends described by Morningstar DBRS and EY.
Starling Bank is one of the UK’s strongest digital banks. It became profitable in 2020 and has grown fast in both retail and business banking. With Raman Bhatia now leading the bank, Starling is moving into a new phase. Its strong services for small businesses helped it stay stable during and after the pandemic. Like other European neobanks, Starling faces uncertainties and tight regulation in 2025, as highlighted by Morningstar DBRS and EY.
Monzo, also based in London, is a well-known name in UK fintech. Millions of people use it, and features such as instant spending alerts and budget insights have set new standards for modern banking. Monzo reported its first month of profit in 2023 and continues to grow as competition in digital banking gets tougher.
WeBank is China’s first digital-only bank and is backed by tech giant Tencent. It uses advanced tools like AI and facial recognition and is closely linked to the WeChat ecosystem. Its focus on microloans and financial inclusion has made it a key player in China’s digital finance landscape.
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SoFi began by offering student loan refinancing but has grown into a full digital bank in the US. Its purchase of Golden Pacific Bancorp in 2022 helped it become a full-service banking institution. Today, SoFi offers mortgages, investments and many personal finance tools. Its branding efforts, such as owning naming rights to SoFi Stadium, have boosted its visibility nationwide.
Berlin-based N26 remains one of Europe’s top challenger banks. It received a European banking licence in 2016 and expanded widely before refocusing on its core markets. A major Series E funding round showed strong investor trust. Morningstar DBRS notes that banks like N26 have grown quickly but now face strict regulatory supervision across Europe.
Chime is one of the biggest names in US digital banking. It is known for its fee-free model, early-paycheck access and easy-to-use app. It works through banking partnerships and is heavily backed by venture capital. Young users, in particular, prefer Chime for its simple and transparent features.
Revolut has grown far beyond its UK beginnings. It now operates across many continents and offers services such as banking, stock trading, crypto, and more. After reporting its first full year of profit in 2023, Revolut is now shifting from a fast-growing startup to a global financial institution.
Nubank in Brazil stands at the top of the global challenger banking list. Its 2021 NYSE listing became Latin America’s largest tech IPO. With millions of users in Brazil, Mexico and Colombia, Nubank continues to transform financial access in developing markets.
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Challenger banks in 2025 are at an important turning point. They are expanding worldwide, innovating quickly and becoming more profitable. European banks face tougher rules and slow economies, but the global sector remains strong. These digital-first institutions are pushing traditional banks to evolve, leading to better services and more choices for customers everywhere.
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1. What is a challenger bank?
A challenger bank is a digital-first bank that uses technology to offer banking services more simply and quickly than traditional banks. Most of them work without physical branches and focus on user-friendly apps. They aim to lower fees, speed up processes, and give customers more control over their money.
2. Why are challenger banks becoming so popular?
Challenger banks are growing because people now prefer mobile banking, instant payments, and easy budgeting tools. These banks offer clear fees, flexible services, and a smooth online experience. Younger customers in particular choose them because they want quick and modern financial solutions.
3. What challenges do European challenger banks face in 2025?
European digital banks face strict regulatory checks, economic uncertainty and slower market growth. Morningstar, DBRS and EY all note that anti-money laundering rules, geopolitical issues and tight lending conditions have made expansion more difficult this year.
4. Are challenger banks replacing traditional banks?
Challenger banks are not replacing traditional banks yet. Many customers still use old banks for their main accounts, especially older or higher-income groups. But challenger banks are pushing traditional banks to improve, which benefits consumers and the industry as a whole.
5. Which challenger bank is the biggest in 2025?
Nubank is the largest challenger bank in the world in 2025. It has tens of millions of customers across Brazil, Mexico and Colombia. Its fast growth, low fees and easy digital tools have made it a major force in global banking.