For centuries traditional banking has held its own in the world, with large brick-and-mortar buildings often in beautiful old buildings men and women could come in to cash checks or deposit cash money. But a new sort of banking is on the rise, swiftly gaining ground during the pandemic, and might be here to stay: Neo banking. A form of digital only banking platforms, that deliver high-standard online customer experience for a low or even no fee at all.
Like traditional banking, neo banks make their money marginally between the inflow of money on one side and the lending of money on the other side (Razorpay, 2021). However, in contrast to traditional banking, neo banks offer a completely different digital business model. These fintech banks deliver their services through apps or software in a transparent way and often tend to specialize in one particular financial product (Forbes, 2021). Take for instance Volt, an Australian neo bank that offers a more transparent alternative of saving. According to its website its aim is ‘to do the right thing’ by being open about fees, deals, and advertising. No hoops, hurdlers, tricks, or conditions (Voltbank, 2021).
The largest advantage of neo banks is its cost friendliness. By being fully digital, the company does not have to pay or maintain any physical bank buildings. Furthermore, it uses AI and chatbots to analyze customer patterns and choices in order to improve its services, which provides a better service for a lower cost (Bankbazaar, 2021).
Creating an account is also a lot user friendly as it can be done as easy as from your own telephone at home (Razorpay, 2021). Your card can be used anywhere in the world, unlike some banks that do not provide that service.
However, it is important to note that neobanks are not legally recognized as of now. They rely on other bank partners who are legally licensed for their services. As neo banking is still in its infancy, legal confusion about accountability is still a grey area (Qrius, 2021).
Traditional banks may have been around for a long time, but it seems that neo banks have already taken a head start with its completely digital service. Especially under the young tech savvy generation who can no longer imagine going to a physical bank and demand high customer satisfaction. Welcome to a new age of banking.
