Neobanks- Redefining the Future of Banking – We rely on technology and our dependence on digital platforms is increasing rapidly. From buying groceries to ordering food to meet new people, we have become tech-savvy. So, why not take financial transactions online? Digital banking will not only make services easily accessible but will also save the time and effort of visiting banks or waiting in a long queue. The banking sector is already making a shift toward digitalization and the latest technological disruption in the industry is neobanks. For those who are wondering what are Neobanks – they are digital banks without any brick-and-mortar branches.
As per the latest study, the global neobanking market in 2021 was $47.39 billion and from 2022 to 2030, it is expected to reach an astronomical CAGR of 53.4%. They are transforming the way traditional banks work and cater to customers and will influence the future of the banking system. Let’s understand how:
Neobanks Vs Traditional Banks
Digitalization has resulted in the downfall of the traditional banking model. Customers have evolved and so are their expectations and requirements. Hence, paving the way for an emerging banking model called neobanks. They are advanced financial institutions that operate exclusively online and provide all banking services digitally, with no physical branch.
These banks leverage cutting-edge technology, such as cloud computing, artificial intelligence, and automation to resolve customer issues, enhance their experience, and offer personalized services at reduced costs. The benefits of neobanks are mainly for small businesses. However, considering that RBI still doesn’t permit 100% digital banking, neobanks have to partner with traditional banks in India.
How Will Neobanks Change the Future of Banking?
- Higher Interest and Lower Fees
As Neobanks is available only digitally, they don’t have to spend much on infrastructure and maintenance of branches. Thus, reducing their operational costs and enabling them to offer economical services to customers. People can enjoy low fees and higher interest rates on deposits. Moreover, their online model allows seamless international payments and transactions at low-interest rates.
- Personalized Banking Services
Using disruptive technologies, such as big data, cloud computing, and artificial intelligence in banking has evolved the core nature of the industry. Thanks to automation and AI, neobanks offer personalized services to customers. Tapping into the potential of big data, these financial institutions can easily collect data, analyze customer behavior, and gain valuable insights to make informed decisions and mitigate risks of online fraud. Neobanks are also making the most of RPA to cut down on their manual labor and integrate automated processes to eliminate human errors.
- Enhanced Customer Experience
Neobanks have bridged the gaps of the conventional baking system through their dedicated 24*7 customer support services. They take banking services to customers rather than the other way around. Neobanks offer a mobile-first approach to keep pace with the evolving demands of Gen Z and millennial customers. Also, emerging banking technology helps them provide innovative and instant solutions. They ensure quick onboarding and faster response time through automation. In addition, interactive UI, all-inclusive apps, and constant investment in the right technology are elevating the customer experience.
- Faster Loan Processing
Traditional banks are often criticized for their time-consuming conventional methods to process loan applications. One of the biggest advantages of neobanks is they streamline the traditional and rigid banking structure to speed up the loan possess. Through online verification and minimal or no paperwork, customers can apply for a loan in no time. They simply have to sign in on the website, assess interest rates based on the amount, and choose the loan they want. Once their credit scores are verified, they get an instant loan.
- Assured Security
Neobanks understand the risks of cyber thefts and online infringements that are common in online banking. Therefore, they prioritize the security of their customers through secure and robust baking structures. By utilizing the power of AI, RPA, and cloud analytics, they offer a protected banking system that is free from potential risks. Neobanks are using biometric verifications and 2-factor authorization to redefine the future of the banking industry and build a safer environment for users. Now, customers can access their information and manage funds easily, keeping all other worries at bay.
Neobanks is not just a buzzword in the fintech community but holds great potential to revolutionize the banking system at a global level. This emerging player aims at simplifying financial services and enhancing customer experiences. Yes, it will take some time to transform the current baking industry but with endless technological possibilities, neobanks will soon make the change happen.
Naina Rajagopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, digital savings account app that offers a 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken it upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing, and saving.