Issue link: https://go.axway.com/i/1321495
50 Open Banking APIs State of the Market Report 2020 economy, the traditional business model of banks has been at some risk but the threats seemed distant enough that few banks felt compelled to take urgent action. This has given banks an unjustified confidence, despite their apparent "winning" on several fronts. Some of the threats that many felt were swooping down on banks in the past years, now in 2020 seem less ominous. Banks are shaking off their concerns with neobank challengers, see fintech as less threatening, and have helped hobble the threat of emerging regulations. Neobank challengers are less threatening than they appeared a year ago. In 2020, amidst the impacts of COVID-19, naive business models from challenger banks have reduced their threat level. In 2019, neobanks focused on user experience, digital infrastructure, and marketing techniques to appeal to customers who wanted easy- to-use mobile and internet banking services. With the reckoning that has come with COVID-19, neobanks have faced twin pressures. First, bank customers had less demand for their products after lockdowns and around the world, including throughout Europe and the UK, slowed consumer spending and loan applications 16 . Some neobanks that had built a business model based principally on charging transaction fees and monthly account subscription fees saw their monthly revenues drop substantially 17 . Secondly, customers are less likely to switch to a new bank during a crisis and are more likely to look somewhat favorably at their existing traditional service provider. To date, neobanks have been a threat because they have received heavy investment from venture capital that were able to wait for years in some cases for a profitable business model, instead focusing on the neobank's ability to continually generate growth in their customer base. In the era of COVID-19, this customer growth has slowed and put the weak business models under the spotlight. In many cases, the neobank business models have emulated the business models of incumbent banks: a single revenue model. In some areas, bank customer exodus to fintech has also slowed somewhat under COVID-19. Again, some of this has been due to customer's increasing conservatism during a time of crisis. Some of it is also because banks themselves have acquired their fintech competitors to avoid direct competition.