Technology has seeped through every part of our lives, making much of our day-to-day business smarter and more efficient. Banking is no different.  Neo Bank is one such.  It is a type of bank that does not have any physical branch but offers all its banking services through digital/mobile channels like a smartphone or via web interface.  Neo Banks / Challenger Banks identify their customer / target market very closely and solve their day to day needs / transactions with integrated banking and payments. Neo Banks are reinventing the practices and processes associated with traditional banking.

Neo banks: fertile ground for opportunities

Neo banks, or digital-only banks, continue to make a significant impact on the financial landscape. One reason they have grown so quickly in the past few years is that they often provide consumers with innovative services at no or very low monthly fees on banking services such as minimum balance maintenance, deposits, and withdrawals. Adoption by millennials, micro, small and medium enterprises (MSMEs), and those having sporadic incomes and earnings, embracement of innovative technologies and rising consumerism are some of the catalysts for the success for Neo banks.

Market statics for Neo and Challenger bank shows huge potential growth worldwide.

Why SMEs prefer Neo banks over traditional banks

Hyper enhanced customer service : Neo banks have significantly leaner business models and superior technologies at their disposal compared to traditional banks, providing ease and efficacy in services, such as seamless account creation, round-the-clock customer service supported by chatbots, near real-time cross-border payments, and Artificial intelligence (AI) and Machine learning (ML)-enabled automated accounting, budgeting and treasury services.

Automated services: Apart from providing primary banking services, Neo banks offer automated and near real-time accounting and reconciliation services for bookkeeping, balance sheets, profit and loss statements and taxation services such as GST-compliant invoicing, tax payments record keeping and reconciliation, on mobile platforms for affordable costs.

Transparency:  transparent and strive to provide real-time notifications and explanations of any charges and penalties incurred by the customer.

Easy-to-use APIs:  provide easy-to-deploy and operate APIs to integrate banking into the accounting and payment infrastructure.

Deep insights:  provide dashboard solutions with highly enhanced interfaces and easy to understand and valuable insights for services such as payments, payables and receivables, and bank statements. It’s beneficial for businesses with significant expenditure and appropriate number of employees, to be provided with such insights, reduce expenditure and boost productivity and revenue.

Road Ahead

Of course, this new style of banking won’t be attractive to all, and understandably. The drawback of no physical branches to go into is you cannot speak to someone from your bank face to face. Speaking to a member of staff in person builds a level of rapport and trust that would be difficult to achieve otherwise.

Although with some of the challenges, Neo banks are gathering momentum. Attributes and offerings like accessibility, cost-effective multiple banking, and financial functionalities under one roof and personalization are some of the driving factors globally. They have a great potential to be a disruptor in banking and financial services. Neo banks future will depend mainly on how small businesses adapting challenges.

The outlook is bright and expansive for established Neo banks and new arrivals offering a personalized experience for niche user segments.