The mission was to launch a new bank in one year. And that mission was completed successfully. This is the last in …
We’re knee-deep in the Digital Revolution, and the financial services industry has been anything but exempt from the tide of ‘disruptors’ entering the ring to shake up old practices. Historically the banking industry has been something of a monopoly, with some countries only having five major banks in a financial service region having any real longevity. However, the evolution of financial regulation has lowered the usually high barriers to market, opening the sector up to new challengers.
1: Customer service
The entire premise of Neobanks is to have superior customer service than their more-traditional counterparts, with reactive support and at least the perception of proactive support.
Traditionally these two premises have major cost implications and human resources strain. However, technology and the use of solutions such as Appian and Mambu (providing multi-layer enterprise automation and customer engagement), contact centres, and ease-of-use have turned the ‘old’ notion on its head. The “Freemium model” of customer engagement has been implemented by most Neobanks, but to balance the books they need to increase the per-customer revenue by offering premium services that are more profitable.
Example: You lose your bank card.
Plus, if you forget your pin you can reset it on the app whereas with most traditional banks you need to do this at an ATM machine.
Neobanks have built their systems from the ground-up without the challenges of disparate legacy bank end data silos, typically a blocker to the traditional banking sector due to the cost point of changing systems which have been entrenched for decades. This has allowed them to invest in enterprise “bleeding-edge” technology allowing for cutting-edge customer experience as well as middle and back-end systems which allow multi-layer automation and a “single pain of glass” view of their customers providing the ability for lightning fast account opening, state of the art anti-fraud systems and contact centres.
Some banks still push back against these systems and have provided a digital banking front end but still with the same cumbersome disconnected back-end infrastructure. Even now not every bank has mobile banking capabilities, and some only offering limited functionality.
Neobanks have their traditional competitors trumped when it comes to savings.
Lower overheads+apps that allow customers to manage their finances from their phones= lower fees – this is one of the main ways Neobanks have been able to attract large amounts of customers.
Moreover, not having “bricks and mortar” liabilities mean they are able to offer several services for free, such as withdrawing and transferring money which, traditional banks have to charge for.
To answer the question then, whether Neobanks are really changing old-school finance? And more importantly, are they a threat?
Yes. Yes they are.
It’s safe to say that Neobanks are winning the “Hearts and Minds” campaign with their users having the deep-seated roots of wanting to challenge and move away from traditional banks.
Digital Banks, Neobanks and “digital disruptors” have already started cutting into the revenues of the traditional and financial markets and institutions.
Read Nick Foggin’s complete deep-dive into Neobanking here