• Shivani Deshmukh

2022 A Comprehensive Guide on Neo Banks – Part 2




Banking and financial institutions are looking into ways in which they can shift from a traditional to a more digital platform. Banks of all sizes are trying to figure out how they can work with this new technology and provide easy access to their customers, who have shown that they like the idea of having all their information in one place and being able to conduct most transactions online via their computers or smart devices. Banking will likely never go back to being entirely analog as we see it today; there is too much potential for banks to connect with their customers in new ways, as well as to reduce overhead costs by reducing the number of branch locations.



Table of Contents


What is the difference between traditional banks and Neo banks?




Traditional banks have been in existence for more than 200 years, while Neo banks are new and have only been around for a few years. The difference between traditional banks and Neo banks is that the former is larger, has more branches, and offers more services than the latter.



Traditional Banks:


  • Traditional banks are bigger than Neo banks. The average size of a traditional bank is $30 billion to $40 billion in assets. A Neo bank has less than $1 billion in assets.


  • Traditional banks also have more branches than Neo banks do.


  • Traditional banks are fully functioning institutions with an established customer base and a clear business model.


  • They have access to the money of their customers through accounts, which they can use to make deposits and withdrawals. They also have access to various financial instruments such as loans, bonds, shares, and other investments.


  • Traditional banks use a deposit-taking approach. It is a system of financial services involving the acceptance of deposits and making loans.


  • They are held accountable by government regulations and have a high level of trust from their customers. They have more restrictions on what they can do and how they can operate.


Neo Banks:


  • Neos have fewer branches than traditional banks because they don’t need as many locations to compete with traditional banks on services like checking accounts, savings accounts, and investment products such as stocks or bonds.


  • Also, their business model is different because they don’t need to spread out their income across multiple states or countries like traditional banks do because they don’t need any physical locations to operate from but instead use online platforms like Amazon Web Services (AWS) or Google Cloud Platform (GCP).


  • Neo banks are startups that provide financial services online. Unlike traditional banks that focus on providing a wide range of services for customers through branches across the country, Neo banks focus on providing their services online. With this new technology, they can offer their services at a lower cost than traditional banks.


  • You can open an account with Neo for just about anything: travel, business, and personal expenses, bill payments, and transfers between accounts.


  • Neo bank accounts can be opened in minutes online or with an app on your phone. You can then deposit money into your Neo account from a cash machine or bank account at any time. Your money is immediately available for use in any way you choose - even if it's only £1 or $1!


  • Neo banks rely on peer-to-peer lending or marketplace lending to attract new customers.


  • Neo banks offer online banking services to people who do not want to deal with paperwork or paperwork-related issues.


  • Neo banks are not regulated by the government, but instead, operate independently and are not bound by the same restrictions as traditional banks.


  • Neo banks offer several attractive features such as lower fees and higher interest rates than traditional banks. They also attract a younger clientele who might be looking for an easier way to manage their money.


  • Neo banks are a new type of banking that has been designed to be more user-friendly and accessible. They're meant to offer an array of services that traditional banks do not, including no-fee credit cards and other financial tools for consumers.



Benefits of Neo Banks



  • Enhanced User Experience – The services provided by Neo banks are well-suited and tailored according to the customer. Automated services along with integrated APIs, can support providing an enriching and user-friendly experience to them by saving the time, energy, and psychological costs involved with availing of banking services.


  • Transparency- Owing to the 100% digital nature of neo banks, they can provide real-time updates and on-the-go customer support, saving valuable time and effort on both ends. Better transparency in compliance and service disclosures.


  • Deep and Valuable Insights- Traditional banks lack the technical acumen to provide real-time insights about products and services. Neo banks can leverage this in their favor, to develop better customer insights and provide tailored solutions to their problems. Thus, enhancing their overall user experience.


  • Efficient Customer Acquisition- Through targeted offerings backed by extensive consumer research, neo-banks help in easy customer acquisition, including working professionals, tech-savvy millennials, and MSMEs.


  • Cost Effectiveness- Lower costs, due to the absence of physical branches and low capital investment.



Disadvantages of Neo Banks



  • It has very little backing and less protection from the government. This means that there is little to no regulation in place to protect users from cybercrime, and there are no laws governing how neo-banks can be used.


  • Neo Banks don't have physical branches or ATMs, so you won't be able to cash checks or withdraw cash from your account unless you visit a physical branch of an exchange or wallet provider (like Coinbase). In addition, because these neo-banks don't have physical branches or ATMs there is no way for customers to deposit cash into their accounts without going through an exchange (like Coinbase).


  • They charge a higher interest rate than regular banks.


Conclusion



Neo Banks is an interesting new breed of financial organization and has garnered a lot of attention in recent years. Neo Banks can be accessed 24/7, which is convenient for someone who works during the day or travels frequently. They use cutting-edge technology to provide better customer service and make it easier for customers to manage their finances online. This means that Neo Banks are always up to date with the latest trends in banking software and technology, so they can keep pace with evolving customer needs as quickly as possible.

1 view0 comments