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Although the terms "neo bank" and "digital bank" can be used interchangeably, they are not similar. Before we proceed, let us clarify the primary differences between these concepts. The terms "neo banks" and "digital banks" are frequently used together, and their attributes can overlap. The fundamental difference is the establishment, ownership, range of services, and emphasis on technology and user experience.
Evolution of Neo Banks
The banking business is undergoing a massive shift as a result of the rise of digital technologies and changing client expectations. Traditional banks are increasingly being challenged by neo-banking software, which are digital-only banks that provide a more convenient and personalised banking experience.
1. Neobanks are on the rise In response to the increased demand for convenient and personalized banking services, the first neo-banks appeared in the early 2010s. These early neo-banks were founded by tech entrepreneurs who were unsatisfied with traditional banks' slow and outmoded offerings. To cater to the tech-savvy millennial generation, neo-banks initially focused on personal banking services such as digital wallets, peer-to-peer payments, and no-fee transactions.
2. Personalised Solutions for Busy Executives Because of their emphasis on efficiency and ease, neobanks have become the preferred choice for time-pressed CEOs. These difficulties are addressed by offering executives with simple web and mobile tools for monitoring their accounts wherever they are. Neo banks are developed with working professionals' needs in mind, including real-time expense notifications, automatic expense tracking, and fast expense reporting.
3. Business Tool Integration In contrast to traditional banks, neobanks provide connectivity with popular business tools and apps. They are aware that CEOs use a variety of programmes and services to efficiently operate their businesses. As a result, neo-banking software commonly integrates with accounting software, invoicing platforms, and expense management systems to optimise financial activities and save time.
4. Global Growth Neo banks are not exclusive to a single region or country. Their success stories have inspired business owners and investors all around the world to launch similar enterprises. Neo banks already operate on all continents and offer specialized services in a variety of industries. North and South America, the United Kingdom, Europe, and the Asia-Pacific (APAC) area have seen rapid growth in the neo-banking industry. The United Kingdom (UK) has a head start in neo-banking due to the early implementation of unified banking legislation for the entire European Union (EU).
5. Strategies It would be fascinating to examine the various approaches taken by financial service providers to enter the neo-banking area. One such technique is to first provide a gateway financial service to attract clients before adding more services. For example, a well-known neo-bank with headquarters in the United Kingdom began as an online money transfer and exchange service before evolving into a global neo-banking software platform.
6. Impact After perceiving the potential of neo-bankings to better their digital skills and effectively compete in the changing market, established financial institutions began looking into partnerships and cooperation with neo-banks. Because of this interconnectedness, "Banking as a Service" (BaaS) models emerged, in which neo-banks granted traditional banks access to their technology infrastructure so that they could provide seamless digital experiences without making large technological expenditures.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Sireesh Patnaik Chief Product and Technology Officer (CPTO) at Pennant Technologies
02 October
Jelle Van Schaick Head of Marketing at Intergiro
01 October
Ruchi Rathor Founder at Payomatix Technologies
30 September
Dmytro Spilka Director and Founder at Solvid, Coinprompter
27 September
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