Neobanks: What do they offer?

A neobank is a financial technology-based bank that operates only digitally or through a mobile app, and can offer most of the products and services of a conventional bank, minus the physical subdivisions. These are relatively young companies, with the neobank designation dating back to 2017.

Banking structures, as well as the needs of the population, have changed exponentially over the last few years. While it used to be commonplace to go to the bank in person to make transactions, we can now carry out the same operations from the sofa at home. In response to the new technological context, traditional banks, those that have been around forever, set to work to make a digital banking model available to the public that would allow a considerable number of banking operations to be carried out from any location.

Thanks to this adaptation, digital banks emerged, ready to address society’s new concerns. However, despite streamlining certain banking procedures, digital banks act as subsidiaries of larger banks that already have a specific track record. It is precisely in this context that neobanks were born; a banking structure that starts from scratch and that, moreover, has as a fundamental pillar the use of Fintech technology to serve its customers.

Over the last few years in Europe we have already started to work with neobanks, taking advantage of the technology in the market. But what exactly do neobanks offer, and what are the differences between traditional banking and a neobank?

• Streamlined products and services

We all know what operations a traditional bank can carry out and what procedures can be carried out. The great challenge for them, in fact, was to try to transfer to the virtual world all the procedures that are usually carried out in branches, and they partially succeeded. There are still operations that require a visit to the bank because they cannot be carried out from a tablet or mobile phone. Opening a new account is one of them.

Neobanks, on the other hand, have a much more simplified structure compared to traditional banking. This means that they do not offer all the products or possibilities of the more veteran entities, but they have managed to bring together a good number of services with simpler procedures. In other words, they offer a smaller but at the same time more decisive range of products. Opening a current account, transferring money, managing cards or applying for credit are just some of the procedures that customers can access at any time. For this reason, neobanks are gaining more and more followers among small and medium-sized businesses and young people; they prefer effectiveness and speed in their operations over quantity.

• Zero or almost zero fees

Surely more than once you have heard someone complaining about the commissions that banks ask for in order to manage procedures. These expenses are present on the part of traditional banks because they need to put a cost on the management of their agents, maintaining their branches and the bank itself. It is precisely here where we find one of the most relevant differential features. Unlike these, neobanks can afford a considerable reduction in commissions, since the use of technology means the elimination of the costs that large banking institutions have to face.

As a result, traditional banks have also tried to reduce their costs in order to be able to offer more competitive prices, but they have not managed to match the zero transaction costs or decrease their high savings rates. This is why the neobank model is currently gaining popularity.

• Autonomous customers

This is undoubtedly one of the most differentiating factors between traditional banking and neobanks. While the former are characterised by little autonomy and, consequently, work every day to improve their digital services and thus gain more independence, neobanks offer absolute freedom from the outset through highly advanced technological tools that help customers control their money.

But the downside of this is that neobanks often do not have an interpersonal communication service between the customer and the bank itself. Interactions are limited and very much focused on customer services, behind which there may be machines. In this sense, traditional banks do have the capacity to build stronger relationships between customers and agents. As for their digital subsidiaries, despite not having a physical person, they have customer service time slots to be able to solve any doubt or problem in a personalised way.

11Onze has been training its first 50 agents since 15 March 2021 to provide a personalised service to future customers, offering all the advantages of a neobank with a person-to-person service.