Traditional banking, which has been the preferred option for hundreds of years, has failed to keep up with today's tech-savvy customers. Long waiting times, security issues, and fixed working hours are just some of the problems plaguing today's legacy financial institutions.
As a result, the fintech community developed a solution: neobanks.
Neobanks constitute a new generation of financial institutions that offer banking intermediation services in a 100% digital way. Emerging from the digital transformation in the United Kingdom and Germany, they have expanded rapidly in Europe and are also making their way into Latin America in recent years.
Today we will tell you everything you need to know about neobanks. So stick around to find out!
What is a neobank?
Neo Banks can be defined as digital banks that offer financial services and have no physical branch. They operate online and all transactions are carried out either via the mobile app or via their website. They usually offer a bank account and a card, with different options depending on the type of card you choose (free or paid). According to The State of European Fintech, neobanks had already raised investments of more than €2.4 billion in 2019.
They provide up-to-date and accurate information in real time, serve 'online', and are among the main stakeholders in the development of artificial intelligence. In addition, they target a niche market that does not want to go to branches or wait in queues but prefers to carry out their transactions on the go via an app on their mobile phone.
The use of technology results in cost savings because they have more automated functions, allowing neobanks to have reduced staff. This situation has meant that most of these new banks do not need to charge any fees, which is clearly appealing to customers.
How are they different from a fintech?
The eCommerce Observatory defines it very simply: "Neobanks are banking institutions that use the 'fintech' (financial technology) philosophy. But fintech companies are not banking institutions, they are only intermediaries between the bank and the customers".
It is worth clarifying that only some of these digital entities have a banking license to operate, but the vast majority do not, so they require third party banks to be able to operate normally. Entities granted a banking license are commonly referred as “Challenger banks”, while fintechs offering banking services through a 3rd party licensing agreement are called “Neobanks”.
Rizeapp is a neobank that helps everyday people manage and grow their money autonomously to live a financially healthier life. You won't have to worry about going to bank branches or waiting in queues for any of the financial transactions you need to carry out because you can do it with your phone, from the palm of your hand.
Advantages of neobanks
- Account opening: Neobanks VS traditional banks
In the past, opening an account with a traditional bank was a complicated and very rigid process. However, opening an account with a neobank eliminates the difficulties associated with conventional banking. Through digital banking, customers can open an account at neobanks without having to visit branches of financial institutions, making it more convenient and comfortable. In fact, this trend is growing at such an alarming rate that CEOs of many traditional banking institutions have begun to worry about losing market share.
- Improving financial technology literacy
As more people adopt digital banking services, they learn more about navigating and exploring the new technologies of the banking industry's digital transformation. In doing so, they become more aware of the financial tools available to them and gain more knowledge about financial planning and investment. Through digital banking, the average consumer will more quickly gain a greater depth of financial products and mechanisms.
- More transparent financial services
Neo banks are very transparent and strive to provide real-time information about any charges or fees that are applied to the customer. From the onboarding process and setting up a new bank account, to wealth management services and transactions, they aim to inform consumers about products and services, but also about management fees and additional charges. In digital-only financial institutions, it is much easier to achieve full transparency, as they collect all kinds of data, which they can share with the customer in real time.
- Cybersecurity in financial institutions
Security is now an essential part of digital transaction processing through banks. While not all neobanks have a fully accredited banking licence like all large-cap financial institutions, it is the way they structure transactions that makes cybersecurity easily achievable for them. Neobanks apply biometric verification, encryption technology and various other security measures to protect customer data and their devices from breach. They provide high security features such as locking and freezing at any time through the app.
- Useful information for neobanking customers
Advanced analytics and AI have enabled technology-driven internet banking to provide customers with multiple useful information about their transactions, spending and investment actions. Most neobanks offer their customers dashboard solutions with greatly improved interfaces and valuable, easy-to-understand information on services such as payments, payables, receivables and bank statements.
... looking for a secure, reliable and personalised neobank?
If you're still not convinced that neobanks are the best option for managing your finances today, then you haven't seen how Rizeapp works. Yeap, you heard it right (I mean, read it right).
Rizeapp has a wealth of features that will help you live a financially healthier life:
- Improve your money management. One app to help you have more time, spend wisely, save more and build wealth on autopilot.
- Enter the world of investing the easy way. Build long-term wealth by investing in quality portfolios managed by top professionals.
- Our IA coach will guide you in everything you need. Easily budget, save and invest your money, with meaningful personal insights to guide you.
The future of personal finance is here, and it comes in the form of neobanking. Or in other words: Rizeapp.