Introduction to Neobanks – What is Neobanking?
Neobanking – derived from concatenating the Greek prefix neo meaning “new” and banking – represents a new form of digital banking and finance to suit the modern era. Unlike traditional banking services, Neobanking offers a digital-only platform, and so ‘Neobanks’ operate solely online, as opposed to traditional banks that have physical locations. Neobanks operate just as an ordinary direct bank does, however it does so exclusively online. The term “challenger banks” have also been used to describe Neobanks in the UK, as they challenge and oppose traditional banking precedents, and began appearing in the country in the form of fintech firms following the 2007-2009 financial crisis.
Advantages of Neobanking over Traditional Banking
– Because everything is online, Neobanks do not need to spend resources on physical branches or labour costs associated with maintaining a physical banking location. This reduces overhead expenses.
– Seamless banking experience by nature of online banking services. Users have a much faster and more customized experience accessing their financials.
– Neobanks tend to be more secure than traditional banks, which tend to rely on using outdated technology infrastructure to protect assets. Neobanks usually have excellent contingency plans in place to ensure customer data safety and privacy is a top priority.
Disadvantages of Neobanking over Traditional Banking
– Impersonal relationship between the customer and the bank, due to the nature of the online banking service. Since there are no face-to-face interactions, this might not be favourable for those who prefer a more personal, less tech-reliant service for their finances.
– Neobanking is deemed untrustworthy and unreliable by those opposed to technological advancements concerning finance.
– Currently, Neobanking suffers from a lack of well-defined protocols and legal statutes. As the industry is still in its infancy stages, this will likely develop over time, but to what extent is unknown.
Banking App Development
Since Neobanking is conducted online, most if-not-all Neobanks have an online mobile banking app alongside a web client that customers can use to access their accounts and services. Banking app development has increased tremendously in recent years, and the market for such continues to grow exponentially each year, especially as the technology for it also develops.
In the US alone, 70% of the customers from the four largest US banks use some sort of mobile banking app – and a further one in five total people in the United States use mobile banking apps in general. There is an increasing demand for complete mobile control over finances as the world evolves into a more tech-focused society, and so mobile banking app development is an extremely bullish fintech industry that the revenue for which increases exponentially. Alongside the US, other developed countries experience significant amounts of users on mobile banking, such as 40% of total internet users in France that use some form of mobile app banking.
It is evident that there is a growing demand for Neobanking services, as more and more customers seek customized and holistic banking services and financial management solutions that are not offered with traditional banking. Younger generations are more tech-literate, and further are more open to having highly advanced fintech products replace traditional means of services. The Neobanking sector is expected to grow exponentially in coming years, whilst offering attractive banking options to those wishing to break free from the bounds of outdated finance management solutions.