With new banking methods popping up every year, figuring out which online tools are best suited for your needs is essential. One such method is neobanking – a new take on finances that focuses entirely on digital and online services.
Neobanking is an appealing new service that offers basic banking capabilities all from a completely and remote source. While neobanking can be used by anyone, whether or not the service is right for you depends on what goals you are striving to achieve.
In this article, we will cover the basics of neobanking and help shed light on who the services are best suited for. Keep reading to learn all about how neobanking compares to traditional financial service!
What is a Neobank?
A neobank is a technology-based bank that operates fully online. These types of digital banks offer basic banking services, such as credit and savings accounts, as well as bill-paying options.
Typically neobanks have an emphasis on mobile apps, helping customers to manage and budget money simply from the palm of their hand. While many neobanks lack more complex features, such as investment options, they are great for helping customers to gain greater control and personal responsibility over their finances.
Benefits of Neobanks
There are a few key benefits to neobanks that make them a worthwhile endeavor for customers, especially those who are new to banking with few assets to manage.
These benefits include:
Accessibility and Convenience: One of the greatest advantages of neobanks for consumers is the ease of access and convenience they provide. With neobanks, you can open and manage an account all through a smartphone or other mobile device, with minimal barriers to entry (such as lengthy applications or the need to visit an in-person branch).
Low Fee: Neobanks operate fully digitally and remotely, eliminating the need to charge customers upkeep fees for the maintenance of a physical store. Likewise, neobanks will often offer a selection of service options to help customers choose a plan that best fits their needs.
User-Friendly Design: In terms of interface design, neobanks are some of the most user-friendly and intuitive digital tools currently available to customers. Navigating a neobank is both efficient and easy thanks to the help of responsive coding and a UX design that is customer-centric.
Who is Neobanking Best Suited For?
Neobanking is best suited for customers who are new to banking or personal finance management. This type of banking service can particularly help with:
Building Savings: With a focus on simple and easily-accessed transactions, neobanks make saving money easier than ever. This is especially helpful for those who are inexperienced in managing their money and are building a savings account for the first time.
Budgeting: Many neobanks will incorporate features that help customers to budget their money according to their income and monthly expenses. This adds extra value to customers, as they are given the tools they need to increase their financial literacy.
Financial Education: On top of budgeting tools, neobanks will also often offer their customers a variety of educational resources to help them learn more about financial responsibility. This is especially important for younger generations of customers who may be new to banking.
Advancements in Neobanking: Offering Services to Compete with Larger Institutions
Neobanks are actively evolving their business models to offer customers more services. For instance, the neobank Zolve has recently announced they will begin offering credit cards to U.S. immigrants to help them build credit upon arrival to the country.
A misconception regarding neobanks is that an account holder cannot access more complex services, such as loans or credit cards. While not all neobanks have advanced to this level yet, many do offer these services as their main products, as well as working to provide more advanced offers as well.
Brazil’s Nubank is a great example of this. As one of the largest FinTech banks within Brazil, this neobank offers loans and credit cards as key products – and even started out as a credit card as its main offering.