The business of banking is changing rapidly. Products and services rendered and built on disruptive technologies are increasingly being placed in the hands of end customers, and the behaviours of banks are changing in terms of customer convenience, transparency, pricing and customer service. As customers’ behaviours and expectations change, so do the business and operational models..
This has reduced the number of trips you make to the bank since you can operate digitally using your mobile phones. The rapid growth of the digital environment has facilitated the rise of neobanks. Let’s see how these banks differ from traditional banks and why they are in demand.
What Is a Traditional Bank and a Neobank?
Most of us are familiar with traditional banking. That is, the bank has a physical location where you visit to get banking services. However, nowadays, with technological advancements, some traditional banks have moved some of their services online.
For instance, individuals can open an account online or use a mobile app for some service. But even with this evolution, still, you may have to visit a local branch at some point.
Neo banking, on the other hand, is a service solely offered online. Therefore, the bank doesn’t have a physical location or office and only interacts with its clients using remote tools. All of the banking products are in a mobile app. As such, individuals can access their money any time from any place. However, Neobanks don’t offer banking services. Instead, they only have niche products. But because of the convenience they give, many people prefer them.
How Do Neobanks Work?
Neobanks use a completely different business model from the traditional banking system. However, both neobanks and traditional banks make profits from money inflow and lending loans.
These banks are digital, meaning they rely on technology to function seamlessly. The decision made by a neobanks depends on data. Note that data collection and analysis are easier as the platforms are modernized.
Using the data collected, a neobank will decide the customers’ behaviour with that type of banking. Then, create customer cohorts based on their observation.
What Can Neobanks Offer You?
Both traditional banks and neobanks are convenient. However, the mobile banking models offered with neobanks make them more accessible. Here is what makes neobanks better;
Ease of Account Creation
Although some traditional banks allow creating an account online, you will still need to visit them with some documents to complete the process. Now, if you’ve tried creating an account with a traditional bank, you are aware of how tedious the process can be.
But neobanks are completely online. So there is no storefront that clients go to create an account. Instead, you only follow several simple steps online from wherever you are, using your phone. And once done, you’ll have your account ready within minutes.
User-friendly Interface
Neobanks focus on providing a great customer experience. Therefore, you can forget about glitchy banking sites and irresponsive mobile app.
These banks have clean, well-organized, and user-friendly apps. They are responsive and designed with the needs of the customers in mind. In fact, one of the reasons neobanks are popular today is their ease of use.
Broad Services
Neobanks use artificial intelligence (AI) as part of their operating system. This allows them to offer a broad service range, including loans, depositing and withdrawal, etc. Also, AI enables these banks to create personalized services for their clients and develop creative and practical solutions to problems their customers face or may face.
Lower Fees
Since neobanks don’t operate in physical locations, they don’t need to rent a space for their staff to work. So this saves them a lot of money that benefits the customers. Therefore, these banks charge lower fees on their loan interest and other services.
Neobanks VS Traditional Banks
The main similarity between these two is that they are both banking types. Thus, both deal with money. However, their place of operation is among the things that differentiate them. While traditional banks have physical branches, neobanks are strictly online within a client’s smart device.
Although some traditional banks have online banking portals, they were not started to be mobile or digital at first. However, neobanks are solely structured to be online, meaning that their business model fits the online ecosystem. As such, it makes banking convenient and more efficient.
Also, all traditional banks have a bank license. However, with Neobanks, licensing is mixed. Thus, the license a bank has determines the type of services it can offer and its savings protection level. Now, this can be a bit risky to the customer. Note that some Neobanks do not offer any form of customer protection if there’s a payment dispute.
Final Thoughts
Neobanks are increasingly becoming popular. They give consumers effective and convenient banking. But, while many people are shifting towards online banking, traditional banks will always be there as clients want human interaction.
The choice of which bank to choose is entirely yours. However, make sure the bank offers transparency, convenience, and secure services. If you are looking for instant payday loans, personal loans, or quick cash loans, fundo.com.au is here for you. Reach out, and let’s help you get access to the money you need quickly.
Disclaimer: The opinions expressed in the Blog are for general informational and entertainment purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific investment product. It is only intended to provide education about the financial industry. The views reflected in the commentary are subject to change at any time without notice.