As a result of the impact of the digital revolution, a new actor has emerged.
Neobanks, also known as digital banks, are relatively new players in the banking industry that are shaking up the traditional banking landscape. These fintech startups have been gaining popularity in recent years due to their ability to offer customers innovative and convenient banking services through a completely digital platform.
What are neobanks ?
Neobanks are financial institutions that offer banking services entirely online, without any physical branches. They are primarily accessed through mobile apps or websites and are designed to provide a user-friendly, convenient, and personalized banking experience. Neobanks often use innovative technologies such as artificial intelligence, machine learning, and blockchain to offer advanced financial services to their customers.
Some examples of well-known neobanks are Chime (US-based neobank), Revolut (UK-based neobank), N26 (German-based neobank) and Monzo (UK-based neobank).
The advantages of neobanks
One of the main ways in which neobanks are challenging traditional banks is by offering a more personalized customer experience. Unlike traditional banks, which often have complex and bureaucratic processes, neobanks offer a user-friendly and intuitive interface that allows customers to manage their accounts with ease. Customers can easily track their spending, set up automatic savings plans, and access their accounts on the go, all from their mobile devices.
In addition to a better user experience, neobanks also offer more competitive interest rates and fees compared to traditional banks. This is largely due to their lower overhead costs, as they don’t have to maintain physical branches and can operate entirely online. Neobanks also offer a wider range of financial products, including savings accounts, loans, and investment options, which allows them to cater to a broader customer base.
Another way in which neobanks are challenging traditional banks is by leveraging technology to provide more sophisticated and advanced financial services. For example, some neobanks use artificial intelligence and machine learning algorithms to provide personalized financial advice and help customers manage their finances more effectively. Others are experimenting with blockchain technology to facilitate faster and more secure cross-border payments.
The challenges that neobanks face
Despite these advantages, neobanks still face some challenges in their quest to disrupt the traditional banking industry. One of their biggest challenges is establishing trust with customers, as many people are still wary of entrusting their finances to a completely digital platform. Additionally, neobanks face stiff competition from traditional banks, which have deep pockets and established reputations.
Neobanks are challenging traditional banks by offering a more personalized and convenient customer experience, competitive interest rates and fees, a wider range of financial products, and more advanced financial services. While they still face challenges in gaining customer trust and competing with established banks, neobanks have shown that they are a force to be reckoned with within the rapidly evolving banking industry.
The future of financial services
With the rise of neobanks, there has been a shift in the banking industry, prompting traditional banks and fintech companies to collaborate in order to enhance their services and maintain competitiveness. The emergence of neobanks has disrupted the sector and presented new opportunities for growth and creativity. To address the challenge posed by neobanks, which prioritize customer-centricity, traditional banks are forging partnerships with fintech firms. It will be interesting to witness how these collaborations between neobanks and traditional banks shape the future of financial services amidst the ongoing evolution of the fintech sector.
Christiane Chiotis
Master2 Cyberjustice – Promotion 2022/2023
Sources :
https://thinksmobility.com/insights/blog/e-banking/how-neobanks-are-changing-financial-services/
https://sherpa.digital/en/thoughts/4-main-challenges-neobanks-are-facing/
https://www.couchonomics.com/blog/how-digital-banks-and-neobanks-are-reshaping-the-industry
