Neobanks are online-only financial institutions that are equivalent to banks. The services of neobanks are generally limited in comparison to conventional banks – in some cases; they offer only simple checking and savings accounts.
In other words, neobanks refer to fintech firms that provide digital-only financial services and do not have physical branches. Neobanks are attractive for digital-savvy consumers who desire to do money management through a mobile app.
Unlike a conventional banking system, neobanks are built on a completely different business model altogether. However, like conventional banks, neobanks do make a profit slightly between money inflow and lending.
And, neobanks do not have any physical location, and that they are entirely online, the fees of a customer are reduced by a considerable amount. Because Neobanks are customer-oriented, they offer customized services to their customers with the help of technology.
Data-driven decisions boost the decision-making process of a Neobank. Since their platforms are also much modernized, it becomes simpler for them to gather and analyze data and understand how their customers behave in the neobanking ecosystem. On the basis of these observations, they make groups of customers based on their behavior instead of merely sticking to one or two data points.
The business account category holds the major revenue share of the neobanking industry. Numerous businesses across the world, are installing neobanking solutions as the preferred method of payment for bulk payouts. Moreover, neobanking models easily incorporate banking into a business workflow with developer-friendly banking Application Programming Interface (API) to fuel the fast and scalable development of businesses. Business banking services incorporate all operations from banking to invoicing and automated bookkeeping in one place.
The savings account category is anticipated to observe substantial growth in the next few years. Neobanking websites contain a user-friendly platform that is specifically manufactured to prevent cyberattacks and enhance the online ecosystem of savings accounts. Moreover, neobanks are capable of monitoring the banking network and simply detect cyberattacks. With the help of neobanking, customers can securely make international transactions.
The enterprise segment garners the major industry share. These platforms provide enterprise-related services like transaction management, credit management, and asset management. The majority of neobanks provide dashboard solutions to enterprises with highly improved interfaces and important insights for services like payments, payable, receivables, and bank statements. These factors will create more growth possibilities for this segment in the next few years.
In the upcoming years, we can expect the personal application segment to grow substantially. The huge penetration rate of smartphones has helped the customer to extensively accept neobanking services due to convenience and ease of use. The service is given with the help of mobile app interfaces, which further assist in money transfers and payments with the help of the app. The ease of opening and operating accounts efficiently will boost the adoption of neobanking solutions in the forthcoming years.
Neobanks have brought the change in four major areas. These areas have combined together to offer an enhanced experience to the customer. Let’s dig into these features.
The focus of neobanks is on enhancing the experience of customers by offering superior customer support and user-oriented solutions. Neobanks enable customers to open an account in less than 10 minutes and the user interface allows fast and easy navigation. With neobanks, customers become capable of making international transactions more cost-efficiently. For instance, a neobanks named Monzo permits users to utilize their card overseas without markups and has low fees for making overseas transfers.
In comparison to the mobile applications provided by conventional banks, those developed by neobanks focus on providing customers with much more functionality in managing their money efficiently. Features like providing real-time spending notifications, giving comprehensive insights into spending habits, and the capability to manage money into various ‘pots’, like saving for a holiday.
The lack of branches and the emphasis on technology mean that neobanks are flexible enough to respond to changes in an effective manner and implement new features. It also decreases their operating costs considerably, enabling them to provide lower fees for customers.
Mainly, neobanks aim to be as transparent as possible with the public about their operations. This involves delivering annual financial reports, and utilizing a less corporate tone in their interactions with customers.
Everybody is aware of the struggle of creating an account in a conventional bank. Sure, this process had become more streamlined, but still, the rigidness is not entirely gone. With neobanks, creating an account becomes very simple.
Neobanks do not incorporate new technology completely for the sake of being advanced. By not having physical branches and moving everything online, neobanks are popular for saving costs of banking, permitting them to cut fees and increase services to the underbanked.
The Global Neobanking Market size is expected to rise at a market growth of 47.1% CAGR during the forecast period.
