Neobanks are what Slack is for physical offices
Keeping the idea of digitisation and financial inclusiveness at the core, the traditional banks have moved from brick and mortar to adapting the digital versions of their services. Neobanks take it a step further with a digital-only approach.
Neobanks are a fully functional digital-only bank with advanced features.
1. Minimum overheads attract more users.
The most significant expense of traditional banks is their physical branches and ATM installations across the geography. Along with the ownership cost, there comes the maintenance cost of the physical real estate. However, with neo banking, the mobile application
or the desktop interface is the only real estate to be maintained.
As a result, Neobanks can deliver the same services at a much lower cost, attracting more people.
2. Technology Driven
Internet banking has been here for a while, but traditional banks are lacking in digital interfaces. They are struggling to embrace technological advancement. Whereas the new age FinTech startups have been acing the implementation of technology into their
Neobanks offer services above and beyond what traditional banks have been offering, like budget trackers, card management systems, smart UI/UX etc.
3. Faster Turnaround
The implication of technology into the banking processes has further led to a faster turnaround time for neobanks. Their customer service chatbots are equipped with AI capabilities to effectively solve customer concerns.
They are also quick in their services, with most banking issues like password retrieval, card application being resolved in real-time.
4. Caters to the drivers of the economy
Neobanks might have a lesser market share than traditional banks now, but they are growing at a much higher pace.
The global neobank market was worth USD 18.6 billion in 2018 and is expected to grow at a CAGR of around 46.5% between 2019 and 2026, generating around USD 394.6 billion by 2026.
The stats spell that neo banking is banking the previously underbanked population, which broadly includes Gen Z & Y and the financially exclusive population of the society, having a broader scope of financial development.
The Neo Banking Landscape
Neobanks can be of either of the two types; Full Stack Neobanks and Front End Focused Neobanks.
A full-stack neobank is a standalone bank in itself with appropriate banking licenses to offer its services. Here the neobank is in charge of all front end and back end operations. Some examples of such a neobanking model are N26, Monzo, Atom Bank etc.
The banking sector’s digital transformation is faring well with financial inclusion and internet penetration coming in the spotlight. It is an excellent time for FinTech/ Neobanking startup to seize the opportunities and contribute to the movement.