Banking Startups Reset: Profit Paths, Regulation, and the Next Wave of Growth

Banking startups enter a new phase of sober growth

In the Banking sector, After the frothy peaks of 2021, banking startups are navigating a more disciplined market. Global fintech funding rebounded modestly in 2024 but remains well below the 2021 summit, with investors concentrating capital in late-stage leaders and infrastructure plays. The sector raised roughly the low-$50 billions in 2023, a near-halving from the prior year, and early 2024 showed stabilization rather than a surge, according to recent research.

Deal flow has shifted toward profitability, regulatory readiness, and payments or core banking infrastructure—areas perceived as essential in a higher-rate environment. Digital banks with sticky deposits, card economics, and growing fee income have found a more receptive audience than those reliant on unsustainably subsidized growth. Founders report longer diligence cycles as investors probe balance sheet risks, compliance posture, and funding runway.

This reset is pushing teams to prioritize durable revenue over breakneck customer acquisition. The emerging consensus: land a bank partner early, keep cost of funds low, diversify income streams, and automate back office and risk. The new playbook favors fewer product bets executed deeper, not a broad feature race.

Profitability, scale, and the shape of winners

A handful of digital banks are breaking through on both growth and profitability, while many peers consolidate or pivot. Latin America’s Nubank, for instance, has become a scale outlier as it races past mass-market adoption and broadens into credit, investments, and insurance; its customer base cracked the nine-figure mark in 2024, validating a low-cost, mobile-first model in underbanked markets. Meanwhile in the UK, challengers like Starling and Monzo reported sustained operating profits on the back of higher net interest income, interchange, and business banking fees; in the US, SoFi’s bank charter has underpinned a shift to positive GAAP earnings and steadier deposits.

Despite these standouts, the profit picture across the category remains uneven. Only a small fraction of neobanks achieved profitability as of 2023, with many still struggling to drive primary-account behavior and monetize beyond cards. Roughly one in twenty players were in the black, industry reports show, underscoring how essential scale, cross-sell, and disciplined risk are to the model.