Have you heard about the 100% digital banks that are now creating a buzz in the fintech industry? They are called neobanks. These are digital fintech firms that only operate online or through an app to provide exclusive digital financial services.
The quarantine season may have probably caused you to bump into a neobank or have registered yourself in one because of its offered convenience. It first became prominent in 2017 and since then has challenged the bank incumbents. Based on the most updated list of 2020, there are 166 neobanks recorded in the world.
What makes it different from traditional banks? Aside from the lack of a physical branch and internet-only financial services, it has low overhead costs that allow for low fees and higher savings rates. Neobanks also offer a comprehensive window of advantages compared to traditional banks. It has more personalized services, a user-friendly interface, and immediate results, all powered by technology.
Neobanks rely heavily on the internet, and although it gained much appeal to tech-savvy individuals, it is not for someone who does not like keeping up with the technology trends and absence of physical support. It is also less regulated than traditional banks, so customers might want to ensure that their neobanks offer deposit insurance to protect them from losses.
Neobanks represent the new age of banking evolution that emerged from the mistakes and weaknesses of traditional banks. Over the years, the number of neobanks has grown significantly, but incumbents are now developing their own apps. While neobanks offer tons of advantages, traditional banks also have the edge over it, and neobanks must boost its uptake beyond their tech-enthusiast customer base.