Neobanking has taken over the fintech industry by storm and is gaining momentum in the global arena. New players are joining the community daily, and the industry is attracting a lot of attention from internet users. The primary intention of neobanking is to provide customers with a means to bank online. The firms have extensively simplified financial services to reach a broader customer base and improve conveniences. Here is why you should consider switching from brick and mortar banking:
What Is Neobanking?
Everyone appreciates the convenience of completing their banking transactions from the palm of their hands. Besides, the growing distrust of traditional banks has led to the digital revolution in banking. Neobanks are internet or digital banks that do not have a storefront or physical office. All their operations are controlled via a website or mobile app. While they offer similar financial services as a traditional bank, their approach is personalised and user-friendly. If you choose to bank online, you can manage your checking and savings accounts, get personal and business loans, and money transfer services.
You do not need to worry about the security of virtual banks. While they may lack a federal charter or license, most of the financial technology firms partner with a regulated bank. Some of them also operate under existing banks as a product meant to appeal to the tech-savvy demographics.
The Benefits of Choosing Neobanks
While neobanks and traditional banks have different business models, they make money through cash transfers and moneylending services. However, traditional banks incur the cost of maintaining physical offices and employees and consequently charge high transaction fees. They also have standing charges for maintaining accounts. All these expenses can be overwhelming for most customers. Apart from building a website, neobanks do not need extra infrastructure and do not rack up overhead costs. Therefore, they can charge lower fees and pay higher interest rates on savings. You are unlikely to pay fees for low balance, direct deposits, cheque, and debit card payment. The slash in transaction fees and lack of maintenance charges for accounts adds up the bank balances of many users. Most customers with savings accounts earn more than 2% of the amount they would get in a brick and mortar bank.
There is a growing gap between customer needs and banking services from traditional banks; that is why many people are moving to digital options. Neobanks utilise technology to provide an exceptional customer experience in the financial technology industry. For most customers, speed, simplicity of transactions, and quality experience matter most. In neobanking, customers can create accounts from the website or mobile apps and manage all their finances. Digital banks update all transaction details automatically and give correct balances. Apart from money transfer, you can choose a custom savings account and automate your expenses according to your requirements. Some apps will let you create budgets and monitor your loan payment details with a few clicks. Since digital firms collect customers’ data and patterns, they can come up with data-driven recommendations. They provide relevant statistics and insights on the best financial services and assist customers in making investment decisions.
If you ever had to wait for three days for a bank to process a transaction, then you understand the inconvenience it causes. Most traditional banks will give you a headache when processing international transactions. You may have to get a different debit card and suffer through the waiting time. When you bank online, most transactions are instant and with minimal additional charges. Besides, most neobanking firms provide an international card for making purchases and transacting globally with the current exchange rates. The immediate update to your account also gives you real-time insight into your financial position.
User-Friendly Interface and Smart Reporting
Traditional banks provide internet banking services in a bid to appeal to tech-savvy customers. While it is a huge milestone, you have to endure a banking site with glitches and a non-responsive mobile app. What makes neobank a buzzword in the fintech community is the ease of use and responsive apps. The sites are well designed and user-friendly to suit the needs of the users. Account creation is hassle-free, and you can have it up and running in a couple of minutes. You can also link your neobank account to money transfer services and your other accounts for seamless operation. The smart reporting also ensures that you have up to date account information on savings, expenses, and transactions. Neobanks are also incorporating recent technological advancement. For instance, customers can use voice banking and security features like two-factor authentication and biometric security measures. Since customer experience is vital in neobanking, all the apps and websites have support features for helping their users. Most of them use an automated chat feature to answer customers’ questions and resolve their issues.
Small Business Loans
Getting a loan from a storefront bank is a tall order, especially for start-ups with low revenue streams. Neobanks serve both individuals and SMEs. Apart from managing cash flow and simplifying your financial operations, they also provide loans. Digital banks use innovative ways to speed up the loan application process and evaluate their credit score. The funding from fintech firms often attract lower rates and have quick approval. Businesses can also benefit from the flexible payouts and instant reconciliation of transactions. The unified platform for tracking, controlling, and analysing cash flows can come in handy, especially for start-up firms. Most of the digital banks also offer insights to assist in making informed decisions.
Despite all the rewards of neobanking, you should choose your online bank wisely. Every day new banking technologies emerge, and selecting the right bank can be a daunting task. You should be keen on the security features, consider your needs, and research the options available.