In this fast-paced technology phase, our lives are becoming more social and digital. Traditional banking systems have faced increasing competition due to their weak strategies and approach. Evolving customer experience and high online business presence have given rise to a new breed of banks as neo banks.
Today smartphones and the internet is gaining traction in every country. With its wide approach, neo banks took advantage and deliver digital services that attract a lot of millennials and the tech-saved population.
This latest trend operates banking processes online to accelerate their moves towards cashless economics. It promises a seamless online presence by bringing an experimental and digital layer on top of traditional banking.
In this blog post, Let us break up the barriers and demystify the importance of neo banks that modify financial economics conveniently.
Market Size of global neo bank
With the growing time, neo banks have experienced significant growth over the past few years. The market size worldwide was estimated to be around $30 billion in 2020, and it is expected to reach a value of over $394 billion by 2026, growing at a compound annual growth rate (CAGR) of over 50% during the forecast period.
In emerging markets, neo-banks are critical for expanding access. As per estimation, there are roughly 2.8 billion underbanked in the world among which 50% reside in emerging economies. Furthermore, incumbents in emerging markets have not yet been disrupted and do not offer accessible products that cater for most of their population.
Growth relies on numerous factors including the increasing adoption of digital banking services, rising demand for convenience and personalized financial solutions, and the growing dissatisfaction with traditional banking methods. Neo bank services vary across regions and countries due to differences in regulatory frameworks, market maturity, and consumer behaviour.
Significance of neo bank for managing financial services
Neo banks have brought significant advancements to the financial services industry and offer several key benefits for managing one’s finances.
- Streamlined Account Opening
Neo banks have simplified the account opening process compared to traditional banks. They offer quick and hassle-free onboarding experiences, often leveraging digital identification and verification processes. Such a convenient process eliminates the need for extensive paperwork and physical branch visits and allows users to open an account within minutes.
- Lower Fees and Competitive Rates
It typically has lower overhead costs than operating physical branches. As a result, they can pass on the savings to their customers in the form of lower fees or higher interest rates on savings accounts which is advantageous for individuals looking to save or optimize their financial management.
- Innovative Financial Services
This new trend goes beyond basic FinTech innovations and offers a range of innovative financial products and tools that cater to various financial needs. It comes with a lot of prominent features like budgeting tools, expense categorization, goal setting, spending insights, and real-time notifications. Also, collaborate with fintech companies to provide additional services such as investment management, foreign currency exchange, and peer-to-peer lending.
- Advanced Security Measures
Neo banks prioritize security to protect user data and transactions. They employ robust encryption protocols, two-factor authentication, biometric authentication, and transaction monitoring to ensure the safety of user information.
- Fast Loan Processing
The old approach is quite time-consuming and slow. Neo banks are a great asset with no or little paperwork and online verification. With easy access to amount and interest rate, customers can choose different offers as per their requirements.
- Enhanced Customer Experience
They prioritize user experience and design as they offer intuitive interfaces, clean and user-friendly designs, and personalized experiences. These factors make it easier for users to navigate the app, understand their financial data, and engage with their finances.
Challenges Faced by neo banks
Neo banks in developed markets face several challenges in scaling up profitability. Let’s understand them.
- Narrowing the gap in customer experience between themselves and incumbent banks as the latest ones are investing heavily in technologies to improve their customer experience and value chain. Such parameters make it difficult for neobanks to differentiate themselves for instance.
- They are typically attracting lower Lifetime value (LTV) customers with their low fees value propositions which are harder to monetize. This requires a significant volume of transactions and customers to generate profits.
- Acquiring and retaining a strong customer base is a significant challenge for neo-banks. Traditional banks have an established customer base and brand recognition, making it difficult for neo banks to attract customers away from familiar banking institutions.
- To provide a comprehensive suite of financial services, neo banks often collaborate with third-party providers or fintech companies. However, integrating these partnerships smoothly and ensuring seamless interoperability can be a challenge.
- Establishing trust in a relatively new and digital-only banking model can be a hurdle for neo-banks. As they don’t have a physical branch presence, some customers may have concerns about the security of their funds and the reliability of these digital institutions.
How smartData Took a Step for Financial Innovation
Our smartData team have good experience in developing digital wallets/neobank platforms for US, Asian and European clients supporting money remittance, utility-based payments, real-time financial insights, expense management and rewards & benefits.
We integrated different Banking APIs like Hyper-ledger to store transaction data/log files and enforce the contracts and in TRON we use TRX10-based Tokens, authentication of the user account with a bank account, KYC implementation, Mitek for user background verification and sift for fraud detection.
Other than that, we also develop applications with money transfer APIs like grey systems, Dwolla, Tellero and open Bank to fulfil desired needs of the clients. To get a reliable banking software solution. Connect with our technology experts.
If you want to make your financial business highly accessible to users. Our team will help you with all the reliable banking solutions.
Neo banks are at the forefront of transforming the way we manage our money. It eliminated a lot of barriers and frustrations associated with traditional banking and offer seamless onboarding experiences, personalized financial insights, and a wide range of services tailored to individual needs.
Whether it’s budgeting tools, instant virtual cards, or collaborative partnerships with fintech companies, neo-banks provide a comprehensive suite of financial services within a single platform. As the digital landscape continues to evolve, the influence of neo-banks is expected to grow in future with its extraordinary achievements.