Concept of Neobanking
We can consider neobanks as digital-only financial institutions that are similar to the banks. However, neobanks provide only some services in comparison to traditional banks; sometimes they provide only simple checking and savings accounts.
In other words, neobanks mean fintech firms that offer digital-only financial services. Unlike traditional banks, neobanks do not have physical branches. Neobanks are built considering the digital-savvy customers who want to manage their money through a mobile app.
Working of Neobanks
Neobanks are based on a whole different business model in comparison to the traditional banking system. However, neobanks do make a profit slightly between money inflow and lending, like traditional banks.
Because neobanks don’t operate from a physical location, and that they are totally online, the fees of a customer are diminished by a significant amount. The fact that Neobanks are customer-oriented, they provide customized services to their customers through technology.
Neobanks platforms are much advanced, hence it becomes easier for them to gather and examine data and understand how their customers behave in the neobanking ecosystem. On the basis of these observations, they create groups of customers on the basis of their behavior instead of merely sticking to one or two data points.
Neobanking on the basis of account type
1. Savings Account
The savings account expects to observe a major share of the industry. Neobanking websites have a user-centric platform that is particularly manufactured to reduce cyberattacks and make the online ecosystems of savings accounts superior. Furthermore, neobanks monitor the banking network and easily detect cyberattacks. Through neobanking, customers can safely make international transactions.
2. Business Account
In the neobanking industry, the business account segment garners a significant revenue size. The majority of the businesses around the world are deploying neobanking solutions as the favorable method of payment for bulk payouts. Also, neobanking models easily integrate banking into a business workflow with developer-friendly banking Application Programming Interface (API) to boost the fast and scalable development of businesses. Business banking services incorporate all operations from banking to invoicing and automated bookkeeping in one place.
Neobanking based on the Application Outlook
In the forthcoming years, we can anticipate the personal application segment to grow considerably. The massive penetration rate of smartphones has assisted the customer to widely accept neobanking services because of the convenience and simple use. The service is provided with the assistance of mobile app interfaces, which further help in money transfers and payments through the app. The ease of opening and operating accounts effectively will fuel the adoption of neobanking solutions in the next few years.
The enterprise segment obtains a significant share of the industry. These platforms offer enterprise-related services like transaction management, credit management, and asset management. Many neobanks provide dashboard solutions to enterprises with extremely superior interfaces and essential insights for services like payments, payable, receivables, and bank statements. These aspects will help this segment to grow more in the next few years.
Characteristics of Neobanks
Neobanks have brought the change in four significant regions. These areas have combined together to provide an improved experience to the customer. Let’s know these features in the following section.
1. Features and money management tools
As compared to the mobile applications offered by conventional banks, those developed by neobanks aim to provide customers with much more functionality in managing their money efficiently. Properties such as providing real-time spending notifications, offering comprehensive insights into spending habits, and the ability for money management into several ‘pots’, such as saving for a holiday.
2. Customer Experience
The neobanks aim to enhance the customers’ experience by providing exceptional customer support and user-centric solutions. With neobanks, customers are empowered to open an account in less than 10 minutes and the user interface permits fast and simple navigation. With the help of neobanks, customers are capable of making international transactions more cost-effectively. For example, Monzo, a neobanks allows users to utilize their card overseas without markups and has low fees for making overseas transfers.
3. Agility and low-cost structure
The unavailability of branches and the importance of technology mean that neobanks are adaptable enough to respond to changes in an efficient way and execute new features. It also reduces their operating expenses considerably, facilitating them to offer lower fees for customers.
Primarily, the focus on neobanks is to remain neobanks with the public about their operations. This includes delivering annual financial reports and using a low corporate tone in their interactions with customers.
Everyone knows the struggle of creating an account in a traditional bank. Undoubtedly, this process had become more simplified, but still, the rigidness is not totally gone. With the help of neobanks, creating an account becomes very easy.
Neobanks do not integrate new technology totally for the sake of being advanced. Neobanks do not have physical branches, and they do everything online, they become popular for saving costs of banking, enabling them to reduce fees and expand services to the underbanked.