Neobanks’ moves toward profitability could be the path to public markets

The global venture wanted bet on neobanks is massive. London-based Starling Bank has raised increasingly than $900 million, per Crunchbase. The same data source indicates that Chime has raised $1.5 billion. Monzo has raised nearly $650 million. And the list goes on: E-commerce-focused neobank Juni raised $21.5 million last month. Novo, an SMB-focused neobank, raised $41 million in June. Nubank has raised $2.3 billion. And FairMoney has locked lanugo increasingly than $50 million.

On and on and on.

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But despite our unstipulated inclination to lump banking-focused fintech providers that serve consumers, merchantry customers or both into a single bucket, there’s wide divergence in how the various neobank players are performing in the market.

Back in August 2020, The Exchange noted that many neobanks were racking up steep losses. Our read at the time was that the wanted stuff poured into the fintech category was stuff invested aggressively in the name of growth. Based on recent results, that view is holding up.

But not all neobanks are the unprofitable enterprises that they once were. Chime indicated in September 2020 that it generates positive, unadjusted EBITDA. That’s a stricter profit metric than the one that Lyft used recently to claim its clambering into the realm of profitable companies; Lyft posted positive adjusted EBITDA in its most recent quarter, but burned mazuma to fund its operations and posted a wide net loss in the period.

And Starling Bank reached what it describes as profitable territory in October 2020. Things have reverted since our first squint into neobank results.

The trend of positive neobank news unfurled this June, when Revolut reported its recent financial performance. The visitor did post rather negative volume results for the 2020 period. But when we drilled lanugo into its quarterly results, we saw the picture of a fintech visitor scaling its gross margins and revenues while nearly reaching adjusted net income neutrality by Q4 2020. We were impressed.

This morning, let’s add to our running dig into neobank results by parsing recently released data from Starling Bank and Monzo. As we’ll see, although some neobanks are managing to wipe up their ledgers and work toward profits — or reach profitability — not all are in the black.

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