Neobanks: Everything you need to know about these digital banks

written on November 11, 2021

From filling in endless paperwork to waiting for your card and PIN number to arrive in the mail and having to queue up at your local branch for a simple bank transaction, traditional banks aren’t always fun, while keeping on top of your finances the conventional way can, at times, be a nightmare.

As consumer preferences are quickly shifting to online and mobile devices, a new era of banking experience and cash management has emerged – that of the neobank. Offering greater control and full visibility over your finances with up-to-the-minute spending updates and monthly reports, the ability to instantly freeze and unfreeze your cards and to trade investments amongst other advantages, going for a neobank may be just the thing you need to be in control of your money.

Here we present to you everything there is to know about these and offer insights as to why you should consider making the switch.

What is a neobank?

As financial services transform into an industry dominated by customers used to seamless mobile technology, endless personalization and sky-high expectations, the brick-and-mortar banking of the 20th century is no longer fitting the bill. Fintech companies are bridging the gap between banks and customers by offering innovative and user-friendly services. Often confused with digital banks, both are similar in that they offer banking services through smartphones and other devices, however, their similarities end here. By relying on big data and analytics and by embracing all new technologies, these have managed to significantly improve customers’ experience, moving a step ahead from traditional banks to offer additions like spending forecasts and alerts, saving pots and customer support through in-app chat in addition to email and phone.

But it’s not only about moving banking services and products online. By digitizing all functions ranging from product development to customer service and by also automating processes in the back-end as opposed to just the front-end that customers see, digital banking is all about automating every single step of the banking relationship from the ground up.

What's so revolutionary about neobanks?

Although there are differences between each neobank’s app interface, all are designed to make banking easy and to offer full visibility of what’s going on with your account so that you can have better control of your money, spending and saving habits. And whereas some services are similar to what’s offered by traditional banks’ online services like depositing and transferring money to your own accounts or to third parties, others tend to be more innovative.

Here are some noteworthy services championed:

  • Real-time spending notifications
  • Free cash withdrawals
  • Payments abroad with competitive currency rates
  • Direct debit or standing orders
  • 24/7 in-app support
  • Card security controls like freezing and unfreezing your card
  • Saving pots, jars or vaults
  • Monthly spending reports
  • Future spending projections

Traditional Banks vs Neobanks – the main differences

Imagine a bank you never have to visit, queues you never have to wait in, paperwork you don’t need to hassle with and a bulky wallet filled with cash you don’t have to carry around with you. Many traditional banks have been forced to make changes to the way they operate in today’s increasingly digital world. But as they have tried to reinvent themselves to survive, they have also been facing stiff competition from this new breed of banks.

Perhaps some of the most obvious differences between the two is that with neobanks you can conduct all your banking on the go, anytime, anywhere, whereas with a traditional bank, it’s all about the manual actions and face-to-face contact. But there are far more differences between the two.

Simplicity and ease at its best

It’s no secret that opening an account with a traditional bank involves copious amounts of paperwork and a long wait to have your documents verified and your account up and running. With neobanks, this process is more effortless. Usually, all you need for signup is to fill in your details and upload verification documents like a photo of your ID and some form of proof of address. And this ease doesn’t stop here. Whether it is accessing your account and checking your balance, transferring money or paying others, all these functions are completed with just a few taps on your phone.

A more personalised user experience with a wealth of add-ons

Neobanks offer most of the typical functions you would expect from traditional banks. But they also enable you to do more than the obvious. Apart from accessing your accounts exclusively through the app and performing a variety of actions like checking your balance, ordering a card or resetting your PIN, you can upgrade to another plan anytime you want and gain access to perks like free bank transfers, airport lounge access, your very own and unique customised IBAN and so much more.

Agility with lower costs

By being exclusively cloud-based and by making the most of technology and cutting-edge digital networks instead of relying on stand-alone legacy systems, neobanks are far more agile than their brick-and-mortar counterparts. This means that they have better operational efficiency and can respond faster to industry changes, whereas unlike traditional banks that cannot collect customer intelligence, neobanks have a 360-degree view of their clients which can help them be more customer-focused and offer a richer experience. At the same time, by not having physical premises and by having fewer costs, they have the liberty to offer lower fees, so much so that most of their basic services and features are actually free for you to enjoy.

Real-time data analytics right on your phone

From data analytics to open APIs and new technologies like cognitive banking, neobanks have truly harnessed the power of these to offer improved customer experience and even more personalised services.

How old is the concept of a neobank?

Whereas some form of online banking has been available since the 1990s, the true digital bank boom only took off with the advent of the smartphone and its ability to connect with others at all times, transforming consumer habits and demands in the process. At the same time, things like waiting days for a bank transfer to take place has now become unbearable and opening an account that takes more than a few minutes and having to go down to your local branch in person to do so has become a pain. Also known as challenger banks, neobanks have risen up to the occasion in the past few years providing tech-savvy customers a mobile-first and branchless banking service.

What are the benefits of neobanks?

From being convenient and cheaper than their traditional counterparts to offering users total flexibility, neobanks have slowly but steadily started becoming the bank of choice for many across the globe. Here are some further benefits of why you should make the switch.

  • Easy setup - who’s in the mood or has the time for endless paperwork and a process that takes forever? With a neobank, opening an account generally takes just minutes.
  • Simplified onboarding - thanks to a fully-mobile process powered by advanced technologies, onboarding becomes easier. Even the minimal paperwork required can be uploaded with a few taps on the app itself.
  • Virtually no fees – unless you’ve opted for one of the more expensive plans with the additional perks, opening a simple account comes at no cost. This also means that they offer greater financial inclusion.
  • 24/7 banking at your fingertips – you can access your accounts whenever you please, while you can bank anytime, anywhere. And with real-time customer support available, issues can be solved quickly, adding further value to the overall customer experience.
  • Fully automated functions – this means that they provide quick and simple process adjustments, swift product launches, whereas banking transactions are carried out effortlessly and at lightning speed.

How safe are neobanks?

We know what you’re thinking. The vast internet is a dark and dangerous place filled with hackers who are ready to steal your money and personal data. But unlike traditional banks which have been slow to adapt to the demand for a more flexible yet secure banking service, neobanks are ahead of the curve, not only offering an easy-to-use banking platform, but they are security-driven and can quickly react to the latest threats.

Also, by being at the forefront of innovation, these offer the most hi-tech in-app authentication, including secure login and 2FA, online payments with 3DS2 authentication, amongst other features. Plus, all neobanks are approved by their respective financial conduct authority, while most are covered by some sort of a compensation scheme that protects an amount of your savings.

And what happens if you lose or have your smartphone stolen? With most apps you can simply change your password which will automatically log you out from the app. You then simply need to redownload the app again on your new phone without worrying about your money and their fate. In addition, if you have a physical card tied to your account, you’ll still be able to make payments and withdraw cash.

Would you like to dig deeper into how to keep safe while banking with your smartphone? Have a look at these popular security questions.

Boasting flexible and user-friendly services and with new features being added regularly, it goes without saying that the future looks certainly bright for neobanks. Looking to make the switch? Take a look at the many benefits you can enjoy when signing up to Moneybase.

Redefine the way you grow and manage your money today!

Life’s full of mysteries. Your money shouldn’t be one of them.

Redefine the way you grow and manage your money today!

Life’s full of mysteries. Your money shouldn’t be one of them.