Neobanks, or challenger banks, are digital only financial institutions that offer financial services with no physical branches or limited service options. A neobank offers banking services including checking accounts, saving accounts, debit cards, money transfer, budgeting tools, education tools, cash advance, credit cards and lending. The tech savvy younger generation of the contemporary age will fall in love with neobanking and they prefer online banking transactions. It has been reported that there are B2B neobanks targeting startups and small and medium businesses to achieve similar goals. Fewer regulations, less product offering, cloud computing and operating with no physical branches are the unique selling propositions of neobanking.
Streamlined User Experience Offered by Neo Banks
It is an undisputable fact that Neobanks have a towering legacy coupled with skyrocketing popularity. They feature a combo package of information technology plus innovation in the contemporary internet era. Neobank will charge customers an inexpensive fee or no fee at all and streamlined user experience is the majestic feature of neo banks. Entire services associated with mobile bank are done through a smartphone application and they are equipped with a customer centric approach. Marvellous user experience coupled with quick processing time for services including account opening, cash management, and payment make neobank a bank with a difference.
Chase Banking has launched digital only banking and it offers savings accounts, current accounts, open banking services and loan products. Chase Online is known for featuring cutting edge financial products and it is complete with strong marketing materials and sign-on bonuses. PNC Banking had made their entry into the rapidly evolving neobanking landscape and their neobanking services are really feature rich. Neobanking services offered by Bank of America are digital, online only entities that provide variety of services to maximize the experience of customer banking. In neobanking, user transactions are analyzed to understand customer behaviour and offer personalized services.
Prequalification for a credit card, budgeting forecast and insights reporting are examples of user transactions getting analyzed. Neobanks compete with traditional banks based on mobile centric technology along with consumer friendly solutions. They partner with charted financial institutions to ensure deposit accounts on the backend operations. Some prominent neobanks get FDIC approval to become a licensed bank and Varo is the first US neobank that has officially received a national bank charter. The revenue stream of neobanks consist of two main sources: interest income from lending products such as home loan, business loan, personal loan and interchange fees from payment activities when customers use debit cards, credit cards and money transfer.
Neobanks Have to Focus on Customer Acquisition
Neobanks will have to focus on customer acquisition and customer repeat to maintain sustainable growth. It has been pointed out that neobanks attract subprime consumers, limited deposit base, and those who are underbanked. Banking experts opine that Neobanks will continue to acquire and retain customers in the platform in future. Fintech banks have revolutionized the banking industry and they have made the banking space paperless, presence less and cashless. It is a fact that Fintech banks have reimagined the way banking service was delivered to end customers. Fintech examples like Artificial Intelligence virtual assistants have a big impact on banking and it equips banking industry with tools that make it efficient than before.