Why most European challenger banks fail in the US — and where the real opportunity lies

For European challenger banks with international ambitions, the United States has long represented the ultimate prize. Its 330 million potential customers, many of them frustrated by the experience offered by incumbent banks, are increasingly digital-native and have a strong appetite for financial innovation.

Yet the US has proved to be a difficult market for European entrants. To succeed, banks must navigate a fragmented regulatory landscape encompassing both federal oversight and 50 state regulators; commit significant capital; and handle intense competition from established national, regional, and community banks. Many have also underestimated the importance of relationship banking and failed to adapt their propositions to the behaviours and expectations of American consumers.

Even so, a small number of European institutions have established successful US operations. Understanding what distinguishes the swimmers from the sinkers offers useful insight into how the market is evolving – and how new entrants can stay afloat in these choppy waters.

The US rewards patience, not pace

Santander remains one of the few European retail banking success stories in the United States. Its expansion was gradual: the bank entered the US via consumer finance services, built a position in auto lending, and only then broadened into retail banking through acquisition and measured expansion. That approach gave it time to build operational maturity, understand the market, and establish scale before competing more broadly.

The bank also had a cultural advantage. Santander’s heritage across Spain and Latin America gave it a natural connection to the United States’ Hispanic population, which today accounts for almost one in five Americans. The bank is a signatory of The Hispanic Promise, a national commitment by more than 300 organisations to recruit, retain and develop Hispanic employees. That combination of cultural ties and long-term investment has helped build trust in a market where banking relationships often remain deeply personal.

Monzo’s experience points to a different lesson. Despite its strong digital proposition, the challenger struggled to meaningfully scale in the United States. Having withdrawn its application for a US banking licence and operated through a partner-bank model, Monzo announced in 2025 that it would wind down its US operations to focus investment on the UK and Europe.

The lesson is that success in the United States requires more than a compelling digital experience. It demands regulatory readiness, patient investment, and the operational capability to build scale over many years. The US rewards preparation and stamina as much as ambition and innovation.

A different generation, a different banking opportunity

Now, though, the market is changing in ways that could favour a new generation of digital-first financial institutions. Younger consumers are investing earlier, accumulating wealth differently, and approaching financial services with markedly different expectations from previous generations.

The World Economic Forum’s Global Retail Investor Outlook 2024 found that 30% of Generation Z began investing in early adulthood, compared with just 6% of Baby Boomers, while 86% have already educated themselves about personal investing before entering the workforce. Research from the JPMorganChase Institute reinforces this trend, finding that retail investing activity increased by around 50% between 2023 and early 2025. The proportion of 25-year-olds with investment accounts has risen sixfold since 2015, and participation has grown fastest among lower-income households.

The same research suggests a broader structural shift is underway. As home ownership becomes increasingly difficult to achieve, with the average age of a first-time homebuyer in the United States reaching a record 38, investment rather than property is becoming the primary route to long-term wealth creation for many younger consumers.

Consequently, the headline task for financial institutions is no longer that of acquiring current account customers. Banks must attract a generation that is building wealth through markets, expects digital and increasingly AI-enabled experiences, and has little inherited loyalty to incumbent banks. That creates a genuine opportunity for challenger institutions, as long as their proposition reflects how this generation manages money, invests, and builds wealth.

Winning customers before winning their wealth

Changing customer behaviour also alters what a successful banking proposition looks like. Scale, capital and regulatory readiness remain essential, but European challengers also need a compelling reason for customers to switch. Revolut offers an instructive example. Rather than competing head-on with traditional banks, it has built its proposition around solving everyday financial problems, particularly foreign exchange, international travel spending and cross-border remittances, before expanding into broader banking services.

That strategy is already proving effective in markets such as Ireland, where Revolut now serves 3.4 million customers, equivalent to more than 80% of the country’s adult population. Fast onboarding and strong cross-border capabilities have enabled it to compete successfully with established banks despite having no comparable branch network.

The commercial results reinforce the point. According to the Financial Times, subscription revenue increased by 67% year on year to $936 million, while Revolut reported total revenue of $6 billion and pre-tax profits of $2.3 billion for 2025: an extremely healthy profit margin of 38%. Customers will pay for financial services when the value extends beyond a current account.

For challenger banks, the opportunity may not lie in competing immediately for retail deposits. It may lie in solving specific customer problems first, building trust through everyday use, and then expanding naturally into investing, wealth management, premium subscriptions and other higher-value services.

Winning trust takes more than technology

Technology is ultimately what makes differentiated customer propositions possible. Digital-native banks such as Revolut have demonstrated how cloud-native platforms enable rapid product development, personalised services, and the flexibility to adapt as customer expectations evolve. Agility is now an architectural advantage.

Yet cloud-native technology is not a differentiator in itself. Every challenger bank claims it. What matters is the capability built on top of it: the data foundations to personalise at scale, the API architecture to launch new services quickly, and the operational resilience to deliver consistently when systems come under pressure. Ultimately, customers judge financial institutions not by the technology they use, but by whether that technology works seamlessly when they want to make a transaction.

That becomes particularly important in the US market, where trust is difficult to earn and easy to lose. As challenger banks mature, success will increasingly be measured not only on customer growth or product innovation, but on operational resilience, governance, regulatory compliance and disciplined risk management.

The measures that matter

Success in the US market cannot be judged by customer acquisition alone. With sufficient marketing investment, attracting new users is achievable. The more meaningful indicators are whether customers deepen their relationships over time, adopt multiple products, generate sustainable recurring revenue, and increasingly choose the platform as their primary financial provider rather than a secondary account for travel or payments.

By those measures, the field of credible long-term contenders is considerably narrower than headline customer numbers might suggest.

The European institutions best placed to succeed will combine three characteristics. They will have the capital strength, operational maturity and patience to sustain a long-term market strategy; a differentiated proposition built around technology, data and customer experience; and a genuine understanding of the diversity of American consumers across regions, generations and communities.

The United States has not become an easier market to enter, nor is it likely to. But changing patterns of wealth creation, evolving customer expectations and the emergence of digital-first financial behaviours are creating new opportunities for institutions prepared to build for the long term. For European challenger banks, the US opportunity is clear, but success will depend on patience, discipline and a proposition built for American customers.

Author: Sumant Kumar, CTO, Banking & Financial Markets, NTT DATA