Traditional banking may conjure images of massive brick-and-mortar buildings, broken ATMs, and stacks of paperwork. Neobanks is a new breed of non-bank fintech [financial technology] startups that promise seamless online experiences and low- or no-fee services. Neobanks challenge these stereotypes by offering digital-first—and frequently, digital-only—banking platforms.
The Neobank experience, however, is all that great for customers. Here is a list of some of the most well-known neobanks today, their business models, and some things you might want to consider before switching.
Neobanks are fintech companies that provide apps, software, and other technologies to simplify mobile and online banking. They are also sometimes referred to as “challenger banks.” These fintech companies typically focus on specific financial products, such as checking and savings accounts. Even though many collaborate with these organizations to ensure their financial products, they frequently exhibit greater agility and transparency than their megabank counterparts.
Neobanks, despite what it may seem like, do not replace traditional banks; rather, by heavily integrating contemporary technological advancements, they enhance the current market offer. The neobanks are distinct from online banks in addition to conventional and union banks. Although they don’t have a physical presence, the latter is still included in a nation’s financial system and are subject to that nation’s laws. Neobanks, in turn, possess the following characteristics:
Absence of any association with any national or state bank regulations
- Service rebranding
- Qualitative onboarding
- Help materials with clearly defined user journeys
- Professional tech support
- Continuing maintenance and updates whenever needed.
How do Neobanks Function?
Unlike traditional banks, most neobanks are not chartered, but partnerships between neobanks and chartered banks are quite common. The Federal Deposit Insurance Corp. may protect your deposits if your bank is affiliated with a chartered institution. Still, you should always look for the FDIC logo to be certain.
Most neobanks provide early deposit access and low or no fee structures to serve all customers, whether they need financial assistance or not. Their strategy is entirely digital, and it includes user-friendly websites and intuitive mobile apps. Neobanks work to provide the convenience, flexibility, and transparency that today’s banking customers are increasingly looking for.
Neobanks: Advantages and Drawbacks
Although many people use internet-based technology daily, some people are still dubious of the apps in general; these users frequently doubt the internet and do not trust technology concerning their finances. This mistrust of neobanks is unfounded in any way. Regulatory bodies in every nation still exercise control over and oversight over the activities of these entities even though they are not recognized as banks under federal or state regulations for traditional banking services. For instance, the FDIC in the US would need to certify the service, whereas APRA in Australia requires an ADI license for neobanks. Neobanks are secure, often even more so than what traditional banking offers, which is their first advantage. All you have to do is make sure the neobank you choose has a license or certification from the appropriate organization in your nation.
In addition, the following are some benefits a neobank can provide:
Compared to traditional institutions, neobanks typically offer products and services that are less expensive and do not require a monthly maintenance fee.
Neobanks give tech-savvy people access to all banking services through a single app and the flexibility to manage their finances whenever they want as long as they have a smartphone and an internet connection.
With Neobank, you can create an account in just a few minutes and start using the service (loans, payments, advice) right away. This eliminates waiting a week for the card to arrive by mail.
Of course, every modern service has a drawback; in the case of neobanks, it is
To use a neobank, a customer must have a phone, internet access, and a general comfort level with technology.
Increase the likelihood of disputes. Compared to traditional banks, the government offers less support in cases where the chosen neobank is unreliable and has a problem.
No physical presence
Neobanks do permit conducting all financial transactions online. Neobanks may not be the best option for customers who prefer face-to-face interactions with a representative in a branch, despite the fact that these applications offer strong customer service.
White-Label Banking: What Is It?
Banking-as-a-service (BaaS), in which banks open up their application program interfaces (APIs) to allow third parties to build their own financial products using existing infrastructure, is also known as private label financial services or white label financial services. White label banking removes administrative, judicial, and technical barriers to speed up the builder’s go-to-market strategy.
White-Label Financial Solutions: Who Uses Them?
Traditional banks that don’t want to (or may not be able to) create a good software solution for their services most frequently use white-label software. Then, to retain their current clients and appear cutting-edge and modern, they must use another company’s technology under their branding.
Neobanks, on the other hand, are frequent users of the White Label Neo Banking Platform because they are solely committed to offering financial services online, primarily on mobile devices. Such solutions are also bought by smaller challenger banks from fintech startups, rebranded, and added to their portfolio.
A white-label solution provider typically offers complete support for its software and, in more exceptional circumstances, might even run their software for a third party. Additionally, since white-label banking solutions are created to make it easier for customers to manage their finances, they are not considered banking services under the law and can be used by organizations other than banks.
High-Quality White-Label Banking Services
The following are the top services offered by white-label baking solutions:
- management of accounts
- balance monitoring
- checking and savings accounts
- Transfers and deposits
- issuance of virtual cards
- streamlined bill payment
- insurance estimates
- both personal loans and mortgages
- Online transfers and payments
In 2020, 16% of the adult population in the US increased their debt and continue to carry it month after month with no changes. In addition to statistics showing an increase in unpaid loans and global debt levels, more loans were issued during COVID-19. This trend demonstrates the consumers’ clear need for the financial support and direction provided by the new solutions.
Neobanks undoubtedly influence financial industry trends going forward. These new financial institutions get closer to their end customers and offer a higher level of service than any traditional bank could ever imagine by making financial information, advice, and overall statistics available to every consumer with a tap on their mobile devices.
White-label products for neobanks speed up their progress toward the objective. The current software owners ensure flawless customer service, prompt service, and convenience for the end user while allowing the software to be rebranded to fit the bank’s marketing plan. The modern software market is rife with creative concepts that can increase Neobank’s return on investment or provide a base for creating new financial solutions. If you’re unsure where to begin or need assistance integrating a solution into your daily operations, contact an IT consulting company in New York or another location that works for you.