Neobank is basically FinTech’s offering digital banking services ranging from faster account opening, mobile deposits, digital debit and credit cards, transferring payments, and many more service without the burden of visiting any physical bank.
Neobank is often partnered with traditional banks as they don’t have regulatory licenses.
Partnered banks provide them a platform to build digital banking services on top of the banks such as infrastructure. Neobanks mainly focus on providing a hassle-free banking experience to consumers and SMEs.
The banking industry is evolving and it needs to be updated with the recent technological trend to keep up with the existing consumer demand.
However you will be surprised to know, there is a difference between digital banks and neobanks, and how is that?
Despite both of them are based on the mobile-first approach and focuses on providing digital banking services to the consumer anywhere in the world and many times these words are even used interchangeably but there’s a difference.
Digital banks are the online subsidiary of an already established bank, while neobank exists solely online with no physical branch and run independently or in partnership with traditional banks.
NeoBank versus Traditional Bank
Neobanks basically focuses on solving major banking problems faced by the consumer or businesses during the current era. When it comes to traditional banking, they lack some basic consumer requirements in terms of better user experience, value-added services, etc. which is better-taken care of by neobanks.
For example offering services such as a better way to save money for millennials or manage their financial goals, offering better user experience so that the consumer does not have to call customer care each and every time he faces any issue and especially they use high-end problem-solving Artificial Intelligence tool in order to solve the majority of the issues such as deactivating your card or unlocking your card, etc in just a few clicks.
So, these are a few ways in which neobank is different from the traditional banking experience. Most of the time neobanks often come up with digital onboarding so that customer can open their account in less than 2 to 3 minutes through a totally digital onboarding process.
How are Neobanks beneficial for SMEs or small businesses?
So technically the businesses are required to use multiple interfaces in order to operate their business transactions like separate invoice raising tool, separate payment gateway for payment collection, separate accounting system, etc. which becomes a headache for businesses to manage and most importantly it increases their costs.
Neobanks found this issue extremely painful and hence they leveraged technology and came up with an alternative tool where it links all the required interface such as payment collection, bookkeeping, raising invoices, etc in a single process which makes the business banking process completely convenient and stress free.
So, these are some niche ways in which neobanks are actually differentiating from traditional banks and this are the benefits which businessman looks forward when it compares the traditional banking versus new-age banking.
Neo-banking has been a life-changing experience for small businesses as it has totally revolutionized the way traditional banking works. The small businesses can now focus much more on their businesses rather than worrying about their finances as neobanks have already automated that business banking transaction and it even helps them to manage multiple business accounts through a single app.
Key advantages over Traditional Banking
- Better user experience.
- Better onboarding experience
- Offering different value-added services in a single interface such as integrated payroll for a small business, bookkeeping, payment gateway, etc.
Challenges faced by Neo-banking
- As we know that neobanks rely on traditional banks as they don’t have the license to provide financial services and thus it becomes very important for the consumer to know exactly with which banks are they partnered with.
- The digital banking industry is growing drastically and there are already a number of competitors, which makes it difficult for a neobank to retain customers as there are multiple banks who are all set to grab the market share by providing similar services or niche-based services along with some amazing signup benefits, and hence one has to keep up with the trends so that the consumer always gets the best user experience.
- Fintech companies partner with financial institutions to offer banking services
- They offer banking services entirely online.
- Provides financial payments and money transfer solutions and many more value-added services
- Helps SMEs to automate their business banking system.
- Individuals can also opt for the services as per their choice and only pay for opted services.
List of Global Active Neobanks: –
One should definitely go through some of the below neobanks websites (especially those operating in your country) so as to gain some better insights and look for all the factors we have talked about in this article such as partner banks, services offered, etc.
Before wrapping up, do comment below and let us know will you choose neobanks over traditional banks, if so, why?
Below is the list of global active neobanks bifurcated as per countries:-
Source: Neobank Market
Cover Image: Small Business Prices