The newest buzzword in the FinTech sector is “neo banks.” It has completely overtaken the FinTech sector. By illustrating the potential direction of banking, it simultaneously redefines the banking industry.
But why is a Neo Bank so big? We’ll discuss it, contrast it with conventional and online banks, and discuss its advantages.
Neo Banks
Neo Banks are digital financial institutions without any kind of physical branch. It is a digital bank that is truly branchless. Neo Banks don’t have any physical locations; their presence is only online.
Neo-bank appeals to tech-savvy customers who prefer to manage their money primarily through their mobile app or other online channels.
NeoBanks can be referred to as FinTech companies that offer a wide range of financial services, including lending, money transfers, mobile-first financial solutions, and many others.
Neo Banks’ main goal is to provide seamless customer service that no traditional bank has ever been able to provide. The speed and affordability of Neo Banks are also well known. Neo banks also lower their banking expenses as they use white Label Neo Banking Platforms instead of physical infrastructure, which enables them to reduce their fees and offer their services to those underbanked.
Neo Banks Operation
A banking license is advantageous for neobanks because it enables them to accept customer deposits.
Neobanks that don’t apply for this license frequently form alliances with conventional banks to offer services like deposits and withdrawals.
Some nations have established unique rules for this kind of banking. This implies that neobanks might require physical branches in some countries if they want to hold customers’ money.
Neobank Industry Development
Younger consumers’ increasing demand for digital banking services and consumers of all ages’ growing trust in digital-only banks will both contribute significantly to the growth of neobanks.
With 29.8 million users, the US has one of the highest numbers of digital-only bank account users. Given the size of the nation’s population and the presence of some of the oldest digital-only banks in the world, it is well-positioned to maintain this growth.
By 2024, there will be an estimated 17.9% of the US population, or 47.8 million people, who only have digital bank accounts.
Examples of Neo Bank Use
Credit choices
One of the first uses for analytics, as we previously knew, was credit scoring. With AI, more complex rules can now be created that address the issues with sparse data by taking into account alternative and behavioral data, such as smartphone usage and payment behavior.
Management of Risk
Probably the most crucial job in banks today, as real-time risk assessment is essential to preventing losses in both money and reputation. AI allows for the assessment of unstructured data systems for risk management in addition to quantitative data. Fraud Management has been a particular use case, where triggers can be set when seemingly contradictory spending patterns are seen.
Another industry that AI has impacted is trading.
Trading already involved making decisions in a matter of seconds. By detecting trends in stock price movement from both unstructured and structured data sources, AI can be used to manage entire portfolios.
Individualized banking and guidance
AI is making it possible to reimagine banking from the perspective of the users rather than how the bank has traditionally been organized by product groups like loans and cards. Examples include chatbots that can manage customer queries, Robo advisors that can plan wealth management goals, and customized plans for savings and expense management.
Conclusion
Neobanking is the ideal illustration of how user-friendly banking can be. Customers all over the world already appreciate this innovative, quick, and practical method of banking. If neo-banking can overcome obstacles like lax regulation and a lack of actual bank branches, its growth potential will increase.
However, since neo-banking is still in its infancy, nothing can be said with certainty. The picture will become clearer regarding the direction that neo-banking is moving in a few years. Neo banking becoming the future of banking in the upcoming years won’t surprise me. If you are considering creating a platform like this, you better consult an IT consulting company that has previous experience in creating such a platform. This will help you save money and time.
