Neobanking

Neobanking

A neobank exists solely online without any physical branches and independently or in partnership with traditional banks. This enables them to navigate and comply with the regulatory environment.

A neobank is a type of direct bank that operates exclusively online without traditional physical branch networks. It's a wide umbrella of financial service providers. Neobanks can be called financial technology firms that provide digital and mobile-first financial solutions payments and money transfers, money lending, and more.

Neobanks don't have a bank license of their own but count on bank partners to provide bank licensed services. Unlike a traditional banking system, neobanks have an online and mobile first business model. But, like traditional banks, neobanks do make money marginally between money inflow and lending.

Since neobanks are completely digital, they open up a wide window of advantages to a customer.Most Neobanks focus on providing customers with a single product or service, competing with banks on customer service, products and margin to bring the offering to market. As they gain customers, neobanks often expand their offerings.

History

The term "Neobank" became prominent in 2017 to describe Financial Technology-based financial providers that were challenging traditional banks and the traditional banking model. There were two main types of neobanks that provided services digitally to customers:

  1. Neobanks that applied for its own banking license to provide financial services.
  2. Neobanks that partnered with traditional banks to provide those financial services.

Early Neobanks, such as Monzo or Starling Bank in the United Kingdom, quickly grew by launching beta products with an e-Money license (a license authorized by the FCA that ringfences customer deposits so they can't be used to generate profit). As they have grown, some neobanks applied for full banking licenses with the FCA while others have acquired fully-licensed banks to develop their products and services.

Relationship with Robotics

Neobanks are set to have a similar impact on the banking industry that robotics have had on the manufacturing industry. Neobanks use automation tools, artificial intelligence algorithms, and chatbots to cut down on upfront costs and provide a similar or better user experience of traditional banks at a lower cost. They have also provided greater transparency for those customers and reduced the hidden penalties consumers associate with traditional banks. And, in the case of credit, loan, or mortgage approvals, neobanks often cut down on the time for application and approval. This is often done through innovative or new ways of evaluating an individuals credit or automation of the credit application process. Neobanks, in some cases, allow users to pre-qualify for a loan and see interest rates within minutes.

At the same time, as traditional industries found new ways to use robotics in their industries to automate or compete, traditional banks are increasingly adopting the principals and products developed by neobanks or are acquiring the neobanks. And in the same way robotics and automation has reduced jobs in traditional manufacturing industries, Neobanking has reduced the roles of bank tellers, investment brokers, wealth managers, and others throughout the banking industry.

Timeline

June 23, 2020

Global Neobanking Market 2020: Advanced Technologies and Growth in Sales-Revenue and Demand from 2020 to 2025.

The size of Neobanking market is anticipated to grow at large scale over the forecast period (2020-2025).

May 22, 2020

UAE's Jingle Pay to launch in Middle East as a neobank

March 24, 2020

Singapore consumers will move to digital Neobanks for service innovation.

Some 60% of Singaporeans will migrate services from their current bank to new digital banks, citing sign-up promos and more innovative products and services as key driver.

March 24, 2020

Revolut launches its neobank in the US

January 24, 2020

German Neobank N26 Sees 40% customer increase since summer 2019.

January 6, 2020

Sujith Narayanan, a veteran payments executive who co-founded Google Pay in India (formerly known as Google Tez), said that his Neobank startup, epiFi, has raised $13.2 million.

2020

Open banking and neobanks to continue their slow burn in 2020

According to RFi research there is minimal consumer awareness of open banking and neobanks in Australia, with only a slow growth of understanding amongst consumers.

November 4, 2019

Neobank MoneyLion reaches 5.7 million app users and estimates by mid-2020 MoneyLion will be breaking even.

October 30, 2019

Nubank's app has been downloaded more than Revolut, Monzo, and N26 combined.

The Brazilian company's rapid growth shows the promise of mobile banks in developing markets, where much of the population doesn't have adequate financial services.

July 18, 2019

German online bank N26 is valued at $3.5 billion.

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People

Name
Role
LinkedIn

Further reading

Title
Author
Link
Type
Date

Fintech lending is passé, neobank is in. And, it's ICICI Bank winning for now.

Arti Singh

Web

January 6, 2020

How Will Artificial Intelligence Change The Banking Industry?

Meha Agarwal

Web

January 13, 2020

India's Neo-Banks: What's So 'Neo' About Them?

Advait Rao Palepu

Web

December 4, 2019

NeoBanking: Is the future of Banking here?

Keshav Bagri

Web

September 21, 2019

Neobanks and the next banking revolution

PricewaterhouseCoopers

Web

Neobanks: a global deep dive

Medici

PDF

August 2019

What is a Neobank? Everything You Should Know

Harshitha Rao

Web

September 5, 2019

What is a neobank? How does it differ from traditional banks?

Emily Sorensen

Web

September 9, 2019

Documentaries, videos and podcasts

Title
Date
Link

Companies

Company
CEO
Location
Products/Services

Allica Bank

Mark Stephens

London

SME's Focused Neobank

Atom Bank

Mark Mullen

Durham, United Kingdom

Consumer Focused Neobank

Azlo

Cameron Peake

San Francisco

Business and Entrepreneur Focused Neobank

Banco Original

Marco Linares

Sao Paulo

Consumer Focused Neobank

Bankaool

Francisco Meré

Chihuahua

Consumer Focused Neobank

BankMobile

Luvleen Sidhu

New York City

Consumer and Student Focused Neobank

Anish Acchuthan

Bangalore

Business Focused Neobank

Bnext

Guillermo Vicandi

Madrid

Consumer Focused Neobank

Brubank

Juan Bruchou

Buenos Aires

Consumer Focused Neobank

bunq

Ali Niknam

Amsterdam

Consumer Focused Neobank

Chime Bank

Chris Britt

San Francisco

Consumer Focused Neobank

Coconut (fintech)

Sam O'Connor

London

Entrepreneur Focused Neobank

Compte-Nickel

Hugues le Bret

Paris

Consumer Focused Neobank

DoPay

Frans Van Ersel

Cairo

Business Focused Payroll Neobank

Sujith Narayanan

Mumbai

Consumer Focused Neobank

EQ Bank

Michael Emory

Toronto

Consumer and Wealth Management Focused Neobank

Ffrees Family Finance

Kevin Ashby

Sheffield, United Kingdom

Consumer Wealth Management Focused Neobank

Fidor Bank

Boris Joseph

Munich

Consumer Focused Neobank

Final (company)

Oakland, California

Credit Focused Neobank

GoBank

Dan Henry

Los Angeles

Consumer Focused Neobank

Good Money

Gunnar Lovelace

Marina Del Rey, California

Consumer Focused Neobank

Hello bank!

Miruna Senciuc

Paris

Consumer Focused Neobank

Holvi

Antii-Jussi Suominen

Helsinki

Entrepreneur Focused Neobank

Imagin Bank

Benjamin Puigdevall

Madrid

Consumer Focused Neobank

Instabank

Moscow

Consumer Focused Neobank

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References

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