Author

Nick Merritt

Published

18 December 2024

Estimated Read time

4Mins

Nick Merritt, Executive Director at Designit, on six developments shaping the future of banking in 2025

Retail banks are entering 2025 with a heady mix of ambition and trepidation. A bewildering blend of technological wizardry and ever-shifting customer expectations has forced banks into a relentless cycle of adaptation. To stay ahead, six key areas are emerging as the lodestars guiding their strategies for the coming year.

Digital Transformation and Automation – Predicting Your Needs Before You Have Them

Imagine a world where banks predict your needs before you’ve even realised them. From AI-driven chatbots that never sleep to robo-advisors whispering bespoke investment tips into your ear, automation is rewriting the rulebook on customer interaction. But the magic isn’t confined to the shiny front-end; back-office systems are also getting a makeover. Robotic Process Automation (RPA) is busy in the engine room, banishing inefficiencies and sidestepping human error with quiet efficiency.

And then there’s the matter of personalisation—a concept that banks are finally treating as more than a marketing buzzword. Armed with advanced data analytics, banks are no longer just responding to customer needs—they’re predicting them. Pre-approved loans or a savings plan tailored to your Friday night wine habit? No problem.

Cybersecurity: Evolving as Fast as the Threats

With this digital power comes a greater need for vigilance. Cybercriminals are evolving just as quickly, turning cybersecurity into a battlefield. AI-driven fraud detection tools now scan for anomalies with hawk-like precision, while biometric authentication methods—fingerprints, faces, even voices—transform our bodies into passwords.

Cyber resilience has become essential, ensuring banks bounce back swiftly from attacks. Trust, in banking as in life, remains hard-won and easily lost.

Sustainability: ESG as a Competitive Advantage

Environmental, Social, and Governance (ESG) criteria have transitioned from being a footnote to taking centre stage. Customers are no longer content with bland promises of responsibility—they’re demanding action. Enter green loans with their tempting interest rates, ESG investment funds that let you save the planet while saving for retirement, and carbon-neutral pledges that make you feel virtuous about your overdraft.

It’s not just a moral imperative; it’s good business sense. In a world increasingly attuned to sustainability, ESG is a differentiator. Banks that can convincingly wear the green badge of honour are more likely to attract eco-savvy customers and forward-thinking investors alike.

Embedded Finance & Partnership Models

Embedded Finance might sound like jargon, but it’s quietly reshaping how we interact with money. Why go to a bank when the bank can come to you—disguised as a “Buy Now, Pay Later” button on your favourite shopping app or as a seamless payment option in your rideshare app? Banks are waking up to the fact that ecosystems, not high-street branches, are where the action is.

Partnerships with fintech firms are unlocking new avenues for growth. Whether it’s integrating loans into car dealership platforms or powering payments for subscription services, embedded finance is giving banks a chance to slip into customers’ lives in ways they barely notice—but deeply appreciate.

Cryptocurrencies: Cautiously Testing the Waters

And then there’s the crypto conundrum. Once the domain of tech evangelists and speculative investors, cryptocurrencies are elbowing their way into the mainstream. Bitcoin ETFs have made it easier for traditional investors to dip a toe into the crypto waters, while Ethereum and Ripple (XRP) are offering solutions that align with real-world banking needs.

Ripple’s laser focus on cross-border payments could revolutionise international money transfers, slashing costs and speeding up transactions. Ethereum’s smart contracts, meanwhile, promise to simplify complex processes like loan approvals. And Bitcoin, the poster child of the crypto world, is slowly gaining traction as a viable payment method.

Yet, it’s not all smooth sailing. Volatility, scalability issues, and a regulatory environment that can best be described as “uncertain” are significant hurdles. Still, with pro-crypto voices gaining ground, 2025 might just be the year retail banks cautiously dip their toes into the digital currency pool.

Personalisation: The Age of “Me”

Customers expect their banks to understand more than just account numbers; they want personalised interactions that anticipate their ambitions. Advanced analytics are turning this into reality, moving banking from transactional to relational.

Imagine a bank that adjusts your credit card rewards for your travel habits or nudges you toward your dream car before you even start shopping. Personalisation isn’t just a service upgrade—it’s a survival strategy.

Looking Ahead to 2025 and Beyond…

The opportunities for retail banks in 2025 are as immense as they are complex. Digital transformation is reinventing customer experiences, ESG is aligning institutions with the values of an increasingly conscientious public. Meanwhile, Embedded Finance is quietly rewriting the rules of engagement. Cryptocurrencies, for all their challenges, are becoming harder to ignore, while data-driven personalisation is making banking feel more like a partnership than a transaction.

For banks willing to embrace these shifts, the rewards are clear: deeper customer loyalty, stronger revenue streams, and a reputation for innovation. Standing still is no longer an option.

  • Digital Payments
  • Neobanking

Author

Dan Brightmore

Published

5 November 2024

Estimated Read time

3Mins

New collaboration between Plumery and Payment Components
will enable financial institutions to adopt instant payments without overhauling existing core banking infrastructure

Plumery, a digital banking experience platform for customer-centric banking, has announced a new partnership with Payment Components, a leader in payments and open banking solutions. By decoupling digital experience and payments processes from legacy systems, institutions can now innovate more flexibly and efficiently. They can streamline operations while maintaining their existing core banking frameworks.

Progress for Payments

By leveraging Plumery’s innovative approach and Payment Components’ expertise, this partnership allows clients to accelerate time-to-market and future-proof operations against regulatory shifts such as the Instant Payments Regulation (IPR). Financial institutions can offload the burden of implementing new digital channels and instruments, such as real-time payments, without altering their core systems.

The IPR aims to make instant payments fully accessible to consumers and businesses across the EU. Currently only a minority of service providers support instant payments. While such regulatory changes usually impact core banking infrastructure, the Plumery and Payment Components partnership ensures these systems remain unaffected.

“This partnership is crucial for institutions needing to rapidly modernise without overhauling their entire infrastructure. Together, we offer a powerful, flexible solution that enables our clients to embrace innovation while staying ahead of regulatory changes like the IPR. Adding Payments Components to our partner ecosystem solidifies our commitment to creating cutting edge solutions that embrace digitisation.”

Ben Goldin, Founder and CEO of Plumery 

This global partnership offers a streamlined path to modernisation, enabling financial institutions to stay compliant, competitive and responsive to ongoing market shifts with solutions ready to support firms as they navigate the evolving financial landscape.

“Our collaboration with Plumery will empower financial institutions to seamlessly adopt modern payment technologies, addressing the complexities of regulatory changes, all while minimising disruptions to existing systems. We wanted to work with Plumery because both our company’s share a similar approach, work ethic and most importantly because of the compatibility of our products.”

Sotirios Nossis, Founder and CEO of Payment Components

Plumery

Headquartered in the Netherlands, Plumery’s mission is to empower financial institutions worldwide, regardless of size, to craft distinctive, contemporary, and customer-centric mobile and web experiences.

Plumery operates with a diverse team that embodies a unique combination of seasoned expertise and vibrant innovation. This blend has been cultivated through years of experience at start-ups, scale-ups, and established financial institutions, and most notably at globally leading financial technology companies, where they were instrumental in creating disruptive digital banking solutions and platforms that now serve 300+ banks globally.   

Plumery’s Digital Success Fabric platform provides banks with the foundation for success beyond fast-time-to-market by expediting the development of their digital front ends while significantly cutting costs compared to in-house initiatives or solutions with high total cost of ownership (TCO). 

Payment Components

At Payment Components, we’re reshaping the fintech landscape on a global scale. Today, our solutions are essential for more than 65 banks and financial institutions across 25 countries. We provide componentized solutions in a range of domains, including AI banking, open banking, account-to-account payments, and financial messaging technology. We achieve this through continuous innovation, building software components that help financial institutions become digital champions and deliver richer payment services to their clients. Our name reflects our belief: complicated processes in the financial industry will be replaced by AI-assisted dedicated components. We stand for simplicity, speed, and constant innovation

  • Digital Payments
  • Neobanking

Author

Will Rolph

Published

26 September 2024

Estimated Read time

6Mins

Will Rolph, Business Development Manager at Clear Junction, takes a closer look at the tech making digital remittances possible

Digital remittances are one of the main forces driving financial inclusion. Over 200 million migrant workers send money home every year. FinTech as a force for good can create positive changes for individuals and businesses; remittances are a prime example. Their role in facilitating financial inclusion cannot be underestimated. By increasing people’s purchasing power, raising per capita incomes, and feeding into local and national economic growth.

By 2027 remittances could reach $1.2 trillion, with the potential to unleash profound transformations in their recipient societies. Many factors are driving this growth. These include increasing waves of migration, none are as influential as the proliferation of innovative technology making remittances easier to send and receive. And at much lower cost than traditional money transfer channels beset by high FX fees and sluggish settlement times.

For decades, remittances were dominated by a few players including Western Union and MoneyGram. They have enviable global reach and networks. However, recipients – especially those in rural and remote locations – were faced with a lack of physical offices on the ground where they could collect their remittances. It was common for recipients to have to travel long distances to get their money. The loss of time and convenience is obvious. These often arduous journeys also came with increased risk of theft or loss of funds along the way.

The lack of physical infrastructure soon became a problem that tech was perfectly placed to solve. It did so in a way that allowed mobile payments to leapfrog legacy infrastructure issues with ease.

What’s powering digital remittances?

The tech behind digital remittances is a complex ecosystem that has evolved significantly over time. Furthermore, the pace of innovation shows no sign of slowing down. There are several key technologies and methods involved in advanced remittance solutions.

Electronic Funds Transfer (EFT) is a method of transferring money from one bank account to another electronically. Remittance services often utilise EFT to move funds between the sender’s bank account and the recipient’s bank account or designated payout location.

Payment gateways are another crucial component. These online platforms facilitate the transfer of funds between parties. They securely process transactions, verify payment information, and transfer funds between the sender and the recipient.

Remittance providers often integrate with banks, payment gateways, and other financial institutions via APIs (application programming interfaces). This facilitates access to banking infrastructure and fund transfers. The APIs enable real-time transaction processing, status updates, and seamless connectivity between the remittance platform and other financial services.

Security is paramount when it comes to remittance transactions. Remittance platforms employ encryption tech to secure data transmission and storage. This protects sensitive financial information and prevents fraud. Secure Socket Layer (SSL) encryption, Transport Layer Security (TLS), and multi-factor authentication are commonly used to safeguard transactions and user data.

These technological advances have all played their part in helping remittances to proliferate. People who were out of reach can now access a wide array of sophisticated financial services all from their phone thanks to the neobanking revolution.

Super Apps

The main innovation that has sent remittances skyrocketing is the phenomenal adoption of smartphones, which has paved the way for the rise of money transfer super apps.

The importance of the smartphone in the global remittance market cannot be understated. By necessity, apps need to be user-friendly and easy to navigate to succeed. Apps play a crucial role in improving the remittance process. They offer the speed, cost efficiency, and security that users have come to expect. Furthermore, remittance apps often provide features that allow users to track their transfers in real-time and manage their transaction history easily. This helps in budgeting and financial planning, especially for those who send remittances regularly.

Most importantly, 4G or 5G networks mean such apps can reach users in remote or underserved areas where access to broadband internet infrastructure or traditional banking services is limited or non-existent. This accessibility is in turn driving inclusivity and promoting financial participation and empowerment among a broader segment of the population.

Eastern Europe serves as a good example of where this technology is particularly life changing. Across the continent, banking penetration rates range between 44% in Albania to 92% in Croatia. So, a key challenge and focus for banks, governments, and tech solution providers is driving greater financial inclusion, and improving remittance flows are key to this.

Blockchain

Just as cryptocurrencies use blockchain technology to track assets, some remittance providers are now leveraging the same technology to streamline the transfer process and enhance security.

Blockchain technology enables secure, transparent, and immutable record-keeping of transactions. This reduces the risk of fraud, enhancing trust between parties. Cryptocurrencies like Bitcoin and stablecoins are sometimes used for remittance purposes, leveraging blockchain technology for fast and low-cost digital cross-border transfers.

It’s easy to see the attraction of blockchain technology for remittance providers. Moreover, it is a fully encrypted, decentralised, and immutable ledger, and as such cannot be altered in any way. Also, because blockchain technology is decentralised, no intermediary bank or financial institution can get involved. For these reasons, blockchain could become crucial to the remittance industry in the coming years.

Artificial Intelligence & Machine Learning

There are few industries not being impacted by AI and ML technologies. Both are increasingly being employed in remittance services to detect fraudulent activities, improve compliance with regulatory requirements, and enhance user experience. Furthermore, these technologies analyse transaction patterns, identify anomalies, and provide insights to prevent fraudulent transactions and ensure regulatory compliance.

Why all of this digital transformation matters

Remittances play a vital role in both individual livelihoods and broader economic development efforts. This makes them an essential aspect of global economic relations and poverty alleviation strategies. Additionally, we can see the tangible, life-changing differences that payment technology evolution can achieve. Moreover, through increased household purchasing power, accessing formal and cheaper financial services, and indirectly through increased revenues for remittance service providers and the businesses people buy from.

Clear Junction is a global payments solutions provider that was established in 2016. The company was founded by a veteran team of financial professionals with many years of experience in cross-border payments and banking. Over the years, we have worked tirelessly to build and develop our own proprietary technology to facilitate an end-to-end regulated payments solution. We are licensed and regulated by the Financial Conduct Authority and have offices in multiple locations across the UK and Europe, including London, Poland and Latvia.

  • Neobanking

Author

Dan Brightmore

Published

11 September 2024

Estimated Read time

4Mins

Neobanks are transforming the financial sector as digital-only institutions that offer a comprehensive range of banking services through mobile apps…

Neobanks are transforming the financial sector as digital-only institutions that offer a comprehensive range of banking services through mobile apps and online platforms. These services encompass current and savings accounts, payments, loans, and investments — all managed seamlessly through digital channels.

With cutting-edge financial technology, neobanks provide faster, more affordable, and more convenient solutions for both customers and businesses. The surge in mobile phone use, cloud computing, and artificial intelligence has fuelled rapid growth. 

The neobanking market is even expanding rapidly, with a projected market volume of $10.44 trillion by 2028, according to Statista. This represents a 13.15 percent growth rate from 2024 to 2028.

Innovative Business Models

To offer a broader range of services and better customer experiences, neobanks leverage application programming interfaces (APIs). This model involves integrating various financial applications and services using APIs. It will allow them to manage Know Your Customer (KYC) verifications, do instant refunds, and arrange collections efficiently.

Then, the significant source for neobanks is interchange fees. This model involves charging transaction fees for every transaction and earning a portion of the fees from payment networks like Visa.

Furthermore, credit card business models use credit as a foundation, generating revenue from transaction fees and interest on carried balances to drive growth and profitability. This model starts with credit card services and later offers a bank account. 

Other models allow neobanks to offer high-yield savings accounts and certificates of deposits (CDs). Revenue will come from earning interest on the assets and charging fees for services related to these accounts, such as maintenance fees.

Technology Integration

Neobanks have redefined the banking landscape through a digital-first approach, prioritising customer experience, and leveraging technology to deliver innovative financial services. This combination sets them apart from traditional banks and allows them to offer unique and competitive financial services.

A core characteristic of neobanks is their digital-only operations. By eliminating physical branches, they significantly reduce overhead costs. These savings translate into lower fees for customers and increased competitiveness.

Furthermore, neobanks harness the power of cloud computing, data analytics, and artificial intelligence to deliver personalised financial solutions. These technologies enable them to gain valuable insights into customer behaviour, allowing for tailored product offerings and improved operational efficiency.

Neobanks have also pioneered innovative revenue streams. Unlike traditional banks heavily reliant on interest income, they generate revenue through various channels, including interchange fees and partnerships.

Finally, many neobanks embrace open banking principles. This collaborative approach allows third-party developers to create new financial products and services that complement the neobank’s offerings. By collaborating with third-party developers, neobanks create additional value and broaden their reach.

The Global Neobanking Innovators

Advapay expected the total number of neobanks users to increase to 3.6 billion worldwide by 2024. Moreover, they spread relatively evenly across the main regions. For example, neobanks in North America, LATAM, APAC, and the UK each now accumulate a total price tag of 50 billion dollars or more per region. 

Revolut, a UK-based neobank, stands as a leading example of digital banking innovation. Expanding its services to over 30 countries, Revolut offers multi-currency accounts, currency exchange, stock trading, and insurance.

The neobank employs various innovative business models including API integration, transaction fees, credit card services, high-yield savings, and certificates of deposit. Revolut’s software as a service (SaaS) approach enhances flexibility, scalability, and rapid product development.

Beyond Revolut, Nubank from Latin America showcases innovation through robust security features, diverse financial products, and blockchain-based loyalty programs. Meanwhile, WeBank in China excels in digital lending, mobile payments, and alternative credit scoring.

Future Prospects

The neobanking industry is rapidly evolving, with 278 neobanks operating globally as of March 2023. This intense competition forces neobanks to continuously innovate to differentiate themselves. 

As a result, traditional banks face increased pressure to adapt to these new market dynamics. Neobanks have the potential to drive financial inclusion, foster creativity, prioritise customer needs, and expand globally.

Looking ahead, neobanks can expect a surge in competitors. This will force incumbent banks to either adapt their strategies to defend their market share or become digital attackers themselves to stay competitive in the evolving market.

With competition growing and attention spans shrinking, innovative product launches aren’t something neobanks should do once. Instead, creating agile solutions that are in tune with current consumer needs must be an essential part of their growth strategy.

  • Neobanking

Author

Dan Brightmore

Published

3 September 2024

Estimated Read time

3Mins

Neobanking is different from traditional banking which is operated through physical intermediaries. By implementing an interface and various advanced features,…

Neobanking is different from traditional banking which is operated through physical intermediaries.

By implementing an interface and various advanced features, this type of bank can change people’s views on managing finances by keeping up with rapid technological advances.

In the US, many people have been underserved by traditional banks, facing high fees and a lack of branches. To help, some companies offered prepaid debit cards with checks for bill payments, but these were limited.

The 2010s fintech revolution introduced mobile-first banking through neobank apps. These apps allowed quick account signups with no minimum balance or overdraft fees and offered small, interest-free loans to keep people away from payday lenders.

This model attracted millions of customers, with neobanks profiting from higher interchange fees. However, they also faced challenges such as higher fraud and disputes, impacting their profitability.

In this article, we will discuss the five main benefits of neobanks: convenience, lower fees, a better user experience, faster transactions, and innovative financial products. These advantages will explain why customers are switching to this type of bank.

Convenience

One of the main advantages of neobanks is their ease of access. Customers do not need to visit the bank physically and can carry out all banking transactions anytime and anywhere.

This convenience extends to all processes, from opening an account to transferring money to the destination account. These tasks can be completed in minutes via a mobile phone.

Lower Fees

Apart from accessibility advantages, neobanking offers a competitive fee structure with relatively lower admin fees than traditional banks. This is because traditional banks incur overhead costs to maintain physical branches, while neobanks do not.

As a result, neobanks can pass on savings to customers through lower service rates. Additionally, neobanks save on costs by not requiring workers to operate physical branches.

Enhanced User Experience

Neobanks prioritise user experience by designing intuitive interfaces—making banking straightforward and accessible. They also offer personalised financial insights for each customer.

Neobanking’s mobile applications simplify financial management with budget tools and real-time transaction notifications. These features empower consumers to make informed financial decisions and maintain better control over their finances.

Faster Transactions

Neobanking offers convenience and lower costs while speeding up transactions with advanced technology. This allows users to manage their finances in real time.

For example, customers can quickly transfer money between local and international banks, thanks to the efficient systems deployed.

Innovative Financial Products

Not only are neobanks useful for fast transactions, but they also provide innovative financial products. One such innovation is automatic investment, which allows users to allocate and manage portfolios via a mobile app.

Additionally, neobanks offer unsecured loan products with a quick and transparent application process. This approach not only provides efficiency but also aligns with consumer behaviour in interacting with financial services.

Conclusion

The advantages of neobanking go beyond convenience and cost savings; they also include a consumer-oriented banking approach. By leveraging powerful digital innovations, neobanks offer an accessible and customisable banking platform.

This approach enhances the consumer experience with more innovative financial products and alternative solutions. Neobanking also implements financial transparency policies, allowing consumers to explore and benefit from various banking options.

In the future, neobanks may have a significant opportunity to attract high-value customers who manage large deposits. A mobile app could integrate all their accounts from different banks into one, simplifying deposit management. Additionally, neobanks could use AI to deliver personalised customer service and a premium experience.

  • Neobanking

Author

Dan Brightmore

Published

26 August 2024

Estimated Read time

3Mins

A revolutionary trend has emerged and revolutionised the banking sector. Neobanking has changed market demand and become a consumer favourite….

A revolutionary trend has emerged and revolutionised the banking sector. Neobanking has changed market demand and become a consumer favourite.

Neobanks, or digital banks, offer banking services without physical presence. Unlike traditional banks, which require customers to access services on-site, neobanks can process all services online.

These solutions address the challenges of extensive physical infrastructure and aim to offer more user-centric services. Neobanking offers 24/7 operational access, lower fees, higher interest rates, enhanced customer service, innovative features, and more.

One of the many advantages is seamless digital wallet experiences. Customers can use international payments with competitive exchange rates and lower fees than traditional banks. Another advantage of neobank services is instant loans. This feature makes credit more accessible, including to those traditionally underserved.

Cryptocurrencies and blockchain adoption are growing in neobanking. Digital banks integrate blockchain for secure transactions and smart contracts. Cryptocurrencies like Bitcoin and Ethereum enable global transactions without intermediaries. As regulators adapt, neobanking harnesses blockchain’s potential for decentralised finance (DeFi) and offers access to lending, staking, and yield farming.

Technological Advancements

Neobanks apply the latest technological developments to enhance their services, utilising advancements like Artificial Intelligence (AI) to create personalised systems. Through machine learning, neobanks leverage algorithms for credit scoring, risk assessment, and fraud detection, improving their decision-making processes.

These technologies also strengthen customer service through chatbots, enhance risk assessment and credit scoring, and provide personalised financial advice. Furthermore, AI-driven insights enable neobanks to offer more relevant products and services, boosting customer satisfaction and loyalty.

Market Dynamics

The neobanking market is expected to grow at a CAGR of 35.8 percent during 2023-2030 due to increasing financial digitalisation, as predicted by UnivDatos. The neobanking market is expected to grow at a CAGR of 35.8 percent during 2023-2030 due to increasing financial digitalisation, as predicted by UnivDatos.

The growth can be attributed to the convenience neo-banks offer, such as 24/7 access to services through mobile apps, allowing customers to manage their finances anytime, anywhere. Neobanks have lower operating costs, due to the lack of physical branches, also contribute to their appeal.

Furthermore, supportive government regulations and investor confidence are crucial to this growth. Governments have introduced regulatory sandboxes to foster fintech innovation, encouraging entrepreneurs and investors to enter the market. The success of companies like Stripe, Chime, and Revolut highlights the potential of neobanks to meet the demand for efficient and cost-effective financial solutions.

The market is characterised by dynamic and rapidly evolving trends driven by technological advancements. For instance, some neobanks are exploring blockchain technology for secure transactions and offering cryptocurrency services. This technology caters to the growing interest in digital assets.

Future Directions

The future of neobanking is poised for transformative growth. Neobanks will increasingly target international markets, adapting services to local regulations and consumer preferences. Moreover, this expansion is set to broaden financial inclusion and capture diverse customer bases.

Machine learning algorithms optimise product recommendations and credit assessments. This technology will also grow the adoption of advanced security measures such as biometric authentication, multi-factor authentication (MFA), and real-time fraud detection systems.

Partnerships and ecosystem expansion will become key to sustained neobanking. Collaborations with fintechs, e-commerce platforms, and traditional banks will broaden offerings. Additionally, this ecosystem integration will offer customers access to various financial and non-financial services.

Conclusion

Neobanking is a disruptive force in the financial industry. It enhances financial management by providing a seamless system. Customers can quickly meet their various needs within reach, from transactions in diverse payments to cryptocurrencies and blockchain. These banks utilise the latest technology to provide data-driven services and products to ensure customer satisfaction.

The market is rapidly evolving, driven by technological advancements and changing consumer preferences. Therefore, as neobanks continue to innovate and adapt, they make financial services more inclusive and accessible.

  • Neobanking

Author

Harry Menear

Published

2 August 2024

Estimated Read time

4Mins

Cost-effectiveness and digital-first strategies are positioning neobanks as genuine challengers to established financial institutions.

The financial services industry is experiencing a seismic organisational shift. Increasingly, growth is moving away from traditional brick and mortar banking and towards digital-first banking experiences. Neobanks, financial institutions that operate entirely online and forego physical branches, are at the forefront of this shift.

Catering to a tech-savvy generation, these institutions prioritise convenience and user-friendliness. They focus on providing innovative features, often powered by the latest technological advancements. 

How Neobanks work

Neobanks are financial technology companies that provide banking services entirely through mobile apps and websites. 

They prioritise a user-friendly experience with features like real-time transaction alerts, budgeting and investment tools, and faster account opening.  Neobanks may also offer access to a wider range of trading markets, including cryptocurrencies and stock exchanges.

Their cost-effective model is a key driver of their growth. Consumers benefit from lower or nonexistent monthly fees on core banking services and potentially faster loan approvals with lower interest rates, all managed through user-friendly mobile apps. These factors are fueling the significant growth of neobanks within the financial market.

Current State of Neobanks

Over the past decade, neobanks have carved a significant niche in the financial services industry. Their growth shows no signs of slowing down.

Statista predicts a user base of 376.9 million globally by 2027. This represents a remarkable twenty-fold increase from the 18.95 million users reported in 2017. While the full impact on traditional banking remains to be seen, these trends highlight a shift in the financial services sector.

Successful neobanks typically offer low or no fees on essential banking services like account maintenance, deposits, and withdrawals. They often stand out with faster loan approvals and funding compared to traditional banks, along with competitive interest rates. Additionally, these digital banking features are conveniently accessible through user-friendly mobile apps.

The outlook for neobanking is promising, driven largely by its core strengths – a fully digital experience and streamlined services. Neobanks empower customers to manage their finances entirely online and eliminate the need for physical branches. 

While traditional banks have embraced digitalisation to an extent, neobanks offer a more comprehensive online-only solution that attracts a growing customer base.

Several factors are fueling this growth. The massive adoption of smartphones has created a mobile-first generation comfortable with managing finances through apps. Moreover, collaborations between traditional banks and fintech companies are blurring the lines between the two sectors, potentially leading to a more dynamic and competitive banking environment.

Opportunities for Growth

Neobanks are poised to disrupt the financial services industry with their innovative technology and focus on customer-centricity.  These new financial institutions offer an attractive alternative to traditional banks. However, success in this competitive environment requires a smart strategy.

For neobanks to gain traction, it’s important for them to maintain strong customer acquisition and retention plans. Offering appealing account opening incentives and rewarding loyalty programs can encourage customers to switch or make neobanks their main financial partner.

Ultimately, neobanks that prioritise security, transparency, and excellent customer service while providing innovative digital banking features are best positioned for long-term success in the neobanking industry.

Challenges Ahead

Despite their emergence, neobanks face several challenges that could hinder their future growth. Cybersecurity remains a top concern, as the financial sector is a prime target for cyberattacks due to the sensitive information it handles. Data breaches can have severe consequences for both neobanks and their customers.

Building brand recognition is also a hurdle for new neobanks. Many consumers are unfamiliar with these digital banking options, therefore it’s hard for new players to establish themselves in a crowded market.

Additionally, relying too heavily on third-party partnerships can introduce risks. Conflicts of interest and less control over the customer experience can arise. This lack of control further hinders brand recognition efforts. 

Conclusion

Neobanks are no longer a futuristic concept, but a defining feature of the present financial landscape. This is evident in two key trends. First, mobile apps are becoming increasingly sophisticated. Second, traditional banks are witnessing a global decline in branch networks as they shift focus to online services.

Looking forward, the future of neobanks appears promising. Grand View Research predicts a compound annual growth rate (CAGR) of 47.7 percent for the neobanking industry between 2021 and 2028. 

However, a key obstacle to wider adoption lies in the varying levels of technological comfort among different age groups. While younger demographics readily embrace mobile applications, older generations may require more time to adapt.

  • Neobanking

Author

Dan Brightmore

Published

25 July 2024

Estimated Read time

3Mins

Sage, the leader in accounting, financial, HR, and payroll technology for small and mid-sized businesses (SMBs), has announced an expansion…

Sage, the leader in accounting, financial, HR, and payroll technology for small and mid-sized businesses (SMBs), has announced an expansion of its partnership with a leading neobank. What’s more, Stripe offers a financial infrastructure platform for businesses, to help improve cashflow management and payment processing for SMBs. The partnership is key to helping businesses to move money easier and faster

Sage partners with neobank Stripe

Stripe is trusted by millions of businesses around the world, ranging from startups to enterprises. The partnership with Stripe provides Sage customers with more options to pay and get paid quickly. Additionally, leveraging Stripe’s financial infrastructure, Sage will offer its customers a trusted solution to help ease cashflow and simplify financial processes. From streamlined checkout and payment processing, to Tap to Pay contactless payments, and auto-reconciling bank transfers.

Also, in partnership with Stripe, Sage intends to expand its payments ecosystem. Therefore, ensuring that a growing number of its customers have access to services that will help them to manage their cashflow.

“This partnership signifies a shared vision between Sage and Stripe. To transform how SMBs pay and get paid, helping our customers to simplify cashflow management,” said Walid Abu-Hadba, Chief Product Officer, Sage. “Furthermore, we are committed to harnessing the power of technology to drive innovation, enhance efficiency, and pave the way for growth.” 

Addressing cashflow problems

Supporting customers globally, Stripe’s integration into Sage is currently available in the UK through Sage Accounting, Sage 50 and Sage 200. Also, Stripe is fully integrated into Sage Network, enabling customers to easily plug into the broader Sage ecosystem. Moreover, they can choose additional applications and features such as Sage Connect, automating AR and AP processes to help manage their cashflow and payments.

The expansion of the partnership will see customers benefits including:

Streamlined checkout and payment processing: SMBs with cash trapped in outstanding invoices can make it easier for customers to review their accounts. They can pay with Sage Connect’s customer account portal and Stripe Checkout.

Multiple payment methods: Accept payments from customers through different methods including digital wallets, cards and bank transfers. Additionally, Stripe uses machine learning to surface the most relevant payment methods for customers depending on their location.

Unified payments experience: Collect payments online and in person through Tap-to-Pay, for seamless, in-person, contactless payments No terminal hardware required.

A safe and secure payment experience: Leveraging Stripe’s advanced security protocols and compliance with global financial regulations. Customers can be assured transactions are protected against fraud and data breaches. Providing peace of mind for both businesses and their clients.

Auto-reconciling bank transfers: Saving time with automatic reconciliation. Finally, bank transfers enable customers to pay invoices via bank transfer, streamlining the payment and reconciliation process.

“Sage understands the importance of innovating for its customers. We’re thrilled to be part of its journey,” said Eileen O’Mara, Chief Revenue Officer at Stripe. “Stripe is building a suite of software-defined financial services. Ultimately, we can enable leading platforms like Sage to provide integrated features that make their customers’ lives easier.”

Lastly, this partnership adds to the broad range of payments and banking partners within Sage’s ecosystem.

  • Neobanking

Author

Dan Brightmore

Published

24 July 2024

Estimated Read time

5Mins

The financial services industry is witnessing a shift towards digital-first solutions. Advancements in technology and infrastructure have fuelled the rise…

The financial services industry is witnessing a shift towards digital-first solutions. Advancements in technology and infrastructure have fuelled the rise of neobanking. It offers convenient, cashless transactions through digital banking features.

From just 12 neobanks operating globally in 2015, the number has skyrocketed to 300 as of 2023. Juniper Research expects neobank users to reach 850 million by 2030.

Introduction to Neobanking

Neobanks are digital-only banks. They rely on mobile apps and web interfaces to deliver their services. Customers access and manage their accounts, conduct transactions, and receive support from their devices. This approach allows neobanks to offer lower fees and greater convenience compared to traditional banks. There are ten key features differentiating successful neobanks.

Feature 1: User-Friendly Interface

Neobanks prioritise user-friendly and intuitive interfaces within their core platform—the mobile app. The app lets customers conduct all essential banking functions directly from their smartphones.

Neobanks eliminate traditionally time-consuming processes. Account openings are conducted entirely digitally. They also offer near-instant identity verification, funding, and activation of debit cards and accounts.

Feature 2: Personalised Services

Neobanks leverage artificial intelligence (AI) and machine learning (ML). This data-driven approach helps them understand their customers better. They analyse spending habits and financial behaviours to provide personalised financial advice. This empowers customers to make informed decisions about their money.

Neobanks also use customer data to create targeted marketing campaigns. These campaigns align with individual interests and financial goals. Neobanks’ real-time, personalised approach enhances customer satisfaction and strengthens customer retention and loyalty.

Feature 3: Robust Security Measures

Security is essential for neobanks, as they handle sensitive customer data and countless transactions. Neobanks embrace advanced technologies like AI-powered fraud detection and blockchain encryption. Multi-factor authentication (MFA), encryption protocols, and biometric identification form the first line of defence against cyberattacks.

By prioritising robust security, neobanks can offer the innovative digital banking features customers expect from financial technology. This also ensures they stay ahead of constantly evolving threats and vulnerabilities in the digital banking sector.

Feature 4: Innovative Products

Traditionally, launching new banking features took years. Now, with ML models analysing large amounts of customer data, neobank teams can develop and launch new digital banking features in just weeks. Moreover, this allows them to stay ahead of market trends and meet customer demands quickly.

Feature 5: Seamless integration with other services

According to PYMNTS, consumers are increasingly interested in super apps, with nearly 70 percent wanting a one-stop platform for managing digital finances. This demand pushes banks to embrace open banking.

Neobanks can collaborate more effectively by sharing their APIs with financial technology companies, digital payment providers, and other platforms. Open APIs grant access to a wider customer base, fostering partnerships between banks and e-commerce firms. This integration allows them to meet consumer demand for a more comprehensive digital banking experience.

Feature 6: Low Fees

One key advantage of neobanks over traditional institutions is their cost structure. Without the burden of physical branches, neobanks benefit from lower overhead expenses. This translates to a competitive edge in terms of fees and rates.

Neobanks can charge zero fees for services that typically incur charges at traditional banks. Additionally, they can also provide more attractive interest rates on savings accounts. These factors can be appealing to cost-conscious consumers.

Feature 7: 24/7 Customer Service

The use of AI and chatbots helps neobanks deliver 24/7 customer support. Customers do not have to wait on hold or schedule branch appointments. Instead, they can receive prompt answers to inquiries or resolve issues at any time.

Feature 8: Hassle-Free Account Onboarding

Neobanks are known for their swift account opening experiences. This is achieved through leveraging advanced technology. Intuitive mobile apps and web platforms let customers open accounts remotely within minutes. Also, technologies like AI-powered identity verification and digital document submission expedite the onboarding process.

Feature 9: Automated Saving Feature

One of the unique features offered by many neobanks is automated savings functionality. This functionality allows customers to set up automatic transfers from their checking accounts to their savings accounts. Additionally, these transfers can be triggered by various events, such as on payday or when a certain balance is reached in the checking account.

Feature 10: Cryptocurrency Services Integration

To expand their offerings and cater to a growing interest in digital assets, some neobanks are integrating cryptocurrency services into their platforms. Also, customers can manage their cryptocurrency holdings directly within their neobanking app and simplify the process of buying, selling, and sending these digital assets.

Case Studies

A successful example of neobanks is Revolut. The bank that allows users to buy, sell, and transfer cryptocurrency directly within their app. Revolut also removes any hidden fees associated with traditional cryptocurrency exchanges.

Conclusion

Neobanks’ core strength lies in its focus on flexibility and user convenience. Furthermore, designed specifically for the digital age, they prioritise a seamless user experience. Their focus on mobile-first design and intuitive interfaces makes banking easier and more convenient. This approach allows neobanks to offer a wider range of digital banking features compared to traditional banks’ online platforms.

  • Neobanking

Author

Dan Brightmore

Published

18 July 2024

Estimated Read time

3Mins

Neobanks, the digital-first financial institutions operating without physical branches, have emerged as a potent force in the financial services industry….

Neobanks, the digital-first financial institutions operating without physical branches, have emerged as a potent force in the financial services industry. Leveraging cutting-edge banking technology and a laser focus on customer experience, they are challenging traditional banks’ dominance.

Neobanks operate entirely online, offering a suite of financial services—from current accounts and debit cards to money transfers and budgeting tools—all seamlessly integrated through user-friendly mobile apps. Their core value proposition lies in:

  • Convenience: With their 24/7 access to banking services, they eliminate the need for physical branch visits.
  • Lower Fees: Decreased overhead charges for maintaining accounts and conducting transactions.
  • Seamless User Experience: Intuitive mobile apps prioritise user experience with streamlined account management and personalised financial tools.
  • Financial Inclusion: Neobanks can foster financial inclusion by offering services to those with limited access to traditional banking.

Neobanking benefits

Compared to traditional banks, neobanks excel in user experience and fees. Neobanks offers quick and paperless online applications and a mobile-first approach, allowing customers to access services quickly anytime, anywhere. Their services incur lower fees, with transparent pricing structures.

Consumers, particularly the tech-savvy generation, are increasingly drawn to neobanks due to the accessibility and convenience they bring to the table. The ability to manage finances anytime, anywhere resonates with nowadays on-the-go lifestyles. They are also cost-efficient, offering lower charges that result in direct savings for consumers.

Neobanking in numbers

In 2020, the global neobank market was valued at US$ 18.6 billion, according to a report by Mordor Intelligence. It is expected to record US$ 333.4 billion in 2026. This figure represents a CAGR of 50.6 percent. With a user penetration of 3.89 percent in 2024, the average transaction value per user is US$21,110 in 2024, according to Statista. In 2028, it is predicted that there will be 386.30 million neobank users worldwide.

Some of the biggest neobanking names include Chime. Serving 14.5 million users in 2022, around nine million relied on Chime as their primary bank., as reported by Forbes. In 2024, the number of users grew to 22 million, more than that of SoFi, Dave, MoneyLion, Varo Bank, and Current combined, also as reported by Forbes.

The aforementioned names are not small players either. Varo, for example, managed over 7 million accounts in 2023. Likewise, SoFi recorded 8.1 million users using its services in the first quarter of 2024, a 2.5 million, or 44 percent, increase from 2023’s last quarter.

Another big player is Revolut. The neobank had 40 million users per March 2024, a massive increase from 1.5 million customers in February 2018. It ticked the 30 million mark in 2023.

Impact on Traditional Banks

The rise of neobanks has forced traditional banks to re-evaluate their strategies. Many banks have undergone a digital transformation, investing in mobile banking platforms and improving user experience to compete with neobanks’ digital agility. Traditional banks are also securing partnerships and acquiring neobanks to absorb expertise and expand service offerings.

Future Outlook

The future of financial services may see a more collaborative landscape between neobanks and traditional banks. Neobanks may find value in partnering with established institutions for broader reach and access to a wider range of financial products. Conversely, traditional banks may leverage neobanks’ technological expertise and customer focus to enhance their offerings.

  • Neobanking

Author

Dan Brightmore

Published

16 July 2024

Estimated Read time

4Mins

Neobanking, the fusion of technology and financial services, is reshaping the banking landscape. As we look towards the future, neobanks may bring transformative changes that will impact financial institutions worldwide.

Neobanking emerged around 2017 as a new model in banking, offering fully online services without physical offices and branches. It has rapidly evolved, attracting a growing customer base with its convenience and accessibility. As we enter a new banking era, several predictions will shape the future of neobanking.

There are several key trends and predictions for the future of neobanking, such as the growth of AI-powered services, the increasing focus on cybersecurity, the expansion of neobanking services, and more. These insights are essential for financial leaders facing the evolving financial technology landscape.

1. AI-powered Services

Artificial intelligence (AI) is set to transform neobanking. Financial institutions are increasingly using AI to enhance their services. AI-driven features, such as personalised financial advice, automated customer support, and advanced fraud detection, will become standard offerings. These technologies will enable neobanks to provide more accurate risk assessments and deeper insights, allowing human operators to focus on strategic improvements.

2. Integration with Existing Tech

Integrating emerging technologies such as blockchain, Internet of Things (IoT), and 5G also opens new possibilities for neobanks. These technologies can enhance transaction security, provide real-time data insights, and enable more efficient banking operations, further driving the evolution of neobanking.

3. Expansion of Neobanking Services

Neobanks should diversify their service offerings to meet the evolving needs of their customers. Beyond traditional banking services, we can expect innovations in areas such as personal finance management, investment advisory, and integrated payment solutions. These expanded services will position neobanks as comprehensive financial hubs that fulfil various financial needs.

4. Focus on Cybersecurity in Neobanking

As neobanks operate entirely online, cybersecurity becomes increasingly important. Protecting customer data from cyber threats is critical to maintaining trust. They should anticipate a significant investment in advanced cybersecurity measures, including encryption, multi-factor authentication, and continuous monitoring. They must ensure strong security protocols to prevent data breaches and protect their reputation.

5. Strategic Partnerships

To remain competitive, neobanks will likely form strategic partnerships with traditional banks. These collaborations are a win-win: neobanks gain access to established infrastructure and a broader customer base, while traditional banks benefit from cutting-edge technology. Ultimately, such partnerships will enhance customer experiences by combining the strengths of both banking models.

6. Regulatory Adaptation

The shift in the landscape requires regulatory frameworks to adapt. Governments and regulatory bodies will be crucial in ensuring fair competition and consumer protection in this evolving environment. We can expect new regulations that address the unique challenges posed by digital banking, promoting innovation while safeguarding financial stability.

7. Enhanced Customer Experience

The future of neobanks hinges on their ability to deliver a seamless digital experience and bridge the gap in customer service. Building trust and replicating the human touch, strengths often associated with traditional banks, will be crucial in converting users into primary customers. The shift in focus will be vital for driving long-term profitability.

8. Banking-as-a-Service (Baas)

Beyond their core offerings, neobanks may disrupt the financial landscape further through Banking-as-a-Service (BaaS). Using their expertise and technology, they can empower other businesses to offer embedded financial services, creating a win-win situation for both parties.

9. Green Banking Initiatives

Sustainability will become a priority for neobanks. We expect to see an increase in green banking initiatives, such as offering eco-friendly financial products and investing in sustainable projects. They can leverage their digital platforms to promote environmentally responsible banking practices.

10. Global Expansion

Neobanks will expand their reach globally, entering new markets and catering to an international customer base. The expansion will be driven by the increasing demand for digital banking services and the universal appeal of innovative financial solutions.

A neobanking future

The future of neobanking is bright, with a dynamic and evolving landscape supported by AI, advanced security, and broader financial product offerings. As the model matures, the most successful players will likely be those who can adapt to changing economic conditions, solidifying their position as the industry leader.

  • Neobanking