What Is Neobanking and Why This Concept Is Becoming Increasingly Popular?
In 2023, from the US to Europe to Asia, neobanking is a buzzword that is increasingly becoming a popular concept. Although neobanking is still a relatively new concept in the banking field, its potential is huge. Providing customers with more convenience, technology-driven features, and flexibility, neo banks are quickly becoming a popular choice for most consumers today.
There is no secret, the traditional banking system has been experiencing a massive drift now towards the “Oh, so convenient” world of online transactions since the 2010s. That was right after a Great Recession and during a rapid growth of Internet technologies which has brought the concept of offering financial services through tech-based solutions. Basically, neobanking is a new-age banking approach through mobile apps, applets and widgets, etc. As a result, people prefer to deal with online banking and digital wallets now more willingly rather than dragging to physical banks and malfunctioning ATM machines.
Obviously, consumers are happily moving away from traditional banking to a more promising era of rising fintech and neobanking. If the meaning of neo-banking still makes you wonder, read this blog post and find out what neobanking is about and why to make a switch.
What Is Neobanking?
RedPoint Ventures, with its recently released report on the global neo-banking market, claims that this alternate wave of banking is here to stay. According to this report, the industry is expected to grow by 25-30% in the next five years. This revolution promises to change the face of banking and finance forever.
The whole idea of neobanking is based on reinventing most of the stuff associated with the traditional banking model including internal banking processes, customer experience, product features, etc. Neobanking business model is different compared to the traditional banking system altogether since neo banks are running all their processes completely online. So, neobanking would be the way to go, if you’ve been steadily shifting away from brick-and-mortar banks and physical cash. This approach is for those who want the comfort of making payments online via GooglePay, Paytm, and such. Once you build a relationship with a neobank, you’ll start using its services without signing any physical paperwork. And that’s pretty much what most people are looking for – avoiding all the hussle.
With a bank account, you can save and earn interest on your money, or it may have an element of protection in case anything happens to you. Neobanks are typically a cutting-edge technology and mobile friendly solution, providing a platform for customers to interact with their finances. Some of the most popular neobanks include N26, Revolut (has EMI and bank license), Starling Bank.
Why the Popularity of Neobanks Keeps Growing?
Neobanks aren’t tied to an actual physical location. And this is one of the reasons why neobanks have become very popular. At the same time, they are incredibly customer-centric, and they are proven insanely effective in providing users with highly personalized customer services. That’s because the neobanking ecosystem is fired up via the latest data-driven technologies while entirely being set up on digital platforms.
Since the modern world is becoming more and more reliant on AI-driven technologies, this calls for the modernized form of banking too. Yes, there are still plenty of physical bank branches. But customers less and less want to see pens attached to desks by a small string of ball bearings. Nobody wants to wait in lines anymore to get things done which may take less than 5 minutes otherwise if done online or in a mobile app. And that’s just a small portion of reasons why neobanking is becoming increasingly popular day by day.
The key benefits of neobanking
One main benefit of neobanks is that they offer quick and on-the-go online banking services right under your fingertips from opening a personal account to any other financial aspects involved. Other key benefits of neobanking are:
- Totally paperless process of personal bank account set up.
- Zero minimum balance requirements.
- Low or even zero banking charges for customer services, free investment consultations, etc.
- Rewards like cashbacks, discounts, etc.
- Personalized online banking services for seamless money transfers, online payments and shopping, more.
- 24/7 and round-the-clock customer support and availability.
- App-based banking provides a heightened user experiences (UX) and intuitive user interfaces (UI).
- Instant alerts, notifications, reminders, etc.
- Easy access to financial management.
- Instant access to different investment options.
Having a neobank mobile app installed on your phone, you can set up your savings account with a minimum fuss since the whole process is entirely paperless. Upon the verification and activation of your account, you can start availing of a group of services that top neobanks offer.
Some of the notable ones include:
- Save: deposit cash in your savings account and earn attractive returns on it.
- Pay: quickly take care of all your bills and transfer funds with no additional charges.
- Manage: tracking expenses and learning about spending patterns becomes extremely easy with the Fi analyser. Take it up a notch by linking your other bank accounts, easily monitor your expenses, and plan your budget wisely.
- Invest: goal-based investing, fixed deposits, peer-to-peer investing, etc.
3 Drawbacks with Neobanks to Be Aware of Before Making a Switch
If you’re considering making the switch to a neobank, keep in mind that there’re some things you should think about first. Neobanks have some great features, but they also come with a few potential drawbacks.
Keep in mind:
1. Limited free services. The majority of neobanks offer free services, but this is a basic list and you might need more for your business.
2. Cash withdrawal fees. One of the problems with neobanks is that they don’t always have ATMs available and partner with banks to provide cash withdrawals. But if you use an ATM out of the network, this might lead to higher fees for cash withdrawals.
3. Lack of operations with cash. Depending on a neobank, you can get various financial services online – from simple money transfers to taking out loans. But what if you need to pay in cash? This can be a problem because most neobanks don’t have any operations with cash.
Keep these things in mind before making the switch to a neobank – they could save you some headaches down the road!
Neobanking: Where to Start?
Yes, there are a lot of reasons to switch to a neobank: lower fees, better customer service, and more innovative features than traditional banks. And as the name suggests, they’re built for the digital age, so you can do your banking entirely online or through a mobile app.
If you’re looking forward to switching to neobanking and want to find a neobank that fits your needs, there are a few things to keep in mind. First, consider what kinds of features are important to you. Some neobanks offer cool features like early access to your paycheck or cash back on certain types of purchases. Others have more basic offerings but charge lower fees.
Next, think about how you want to bank. Some neobanks are purely digital, while others have physical locations as well. And finally, consider whether you want a traditional bank-like experience or something more modern and user-friendly.
No matter what your needs are, there’s sure to be a neobank out there that’s right for you. So why not give one a try?
Some necessary steps to take before making a switch
Do your homework. To pick the right bank, do some online research and go over expert/customer reviews where users share info on neobanks site/app usability, their customer experience, rewards programs that are worth checking out, best interest rates, etc.
Understand your expenses. Check if you’ll be able to open a neobank account with lower transaction fees, pay attention to withdrawal costs, check customer-friendly budgeting tools a particular neobank offers, make sure that it provides tools for tracking expenses because it will help you save more along the long run.
Learn about savings account options. There are plenty of neobanks that provide above-average interest rates, especially for a savings account.
Be aware of the trade-offs! It’s important to make sure that the neobank that you’ve picked will be a place that provides smooth and seamless service to you as a customer.
Today, neobanking offers a vast array of different banking services via smartphones and other mobile devices. Neobanks do a really good job in bridging the gap between the traditional banking services and the evolving expectations of customers of our digital age.
The rising popularity of the app-based digital banks helps customers make even more out of their money. Indeed, digital banks do a really good job for Gen Z which requires banking services to be more aligned with their needs, helping younger customers build their credit history, access micro-loans, reach the underbanked, and more.