3 Operating Models of Neo Banks

Everything Worth Knowing About Neo Banks!

Neo banks have taken the world  of banking by storm ⚡️ and not without some very good reasons.  These financial institutions seek to make banking more accessible by offering customers a cheaper and more convenient alternative to traditional banking. In the process, they are changing the face of fintech.

These digital banks that function without physical branches, offer services through smartphones 📱 and other devices. Features and innovative services are simply at the next level in comparison to traditional banking.

Functioning

In terms of operating models, neo banks may partner with traditional banks, act as a separate licensed entity, or serve as a digital extension of a traditional bank.

Features

Rising awareness about these financial institutions and their capability to mold themselves according to the growing ↗️ needs of a tech-savvy generation has led to their rising popularity. Two important stand-out points of neo banks include:

1️⃣ Banking as a Service

Neo banks with innovative features, cutting-edge technology, and superior customer service are in a position to serve their customers more efficiently than traditional banks. They seek to enhance user experience by building the products and services application layer on top of existing banking products.

2️⃣ Marketing as a Strategic differentiator

Neo banks are generally startups. As such, they try to compensate for the lack of trust and legacy through aggressive marketing campaigns. Focusing on social media campaigns, influencer marketing, and positive testimonials, they lay deep emphasis on customer referrals, akin to platform behemoths such as Uber and Netflix.

Factors that make neo banking differ from conventional banks

Often, people confuse neo banking with digital banking. Quite understandably because both offer banking services through devices that can be accessed online. However, there is a marked difference in how neo banks are set up, and how they make use of artificial intelligence (AI) and technology to offer personalized services to customers.  A few factors that differentiate them from other forms of banking are as follows:

1️⃣ No physical locations

Having no physical branches, neo banks are completely app-driven and fully digital. The absence of physical location makes them so flexible and this is the reason several traditional banks want to adapt the model.

2️⃣ 100% startups

All neo banks are startups, generally catering to retail customers as well as small and mid-sized businesses. The segment is often underserved by traditional banks. They leverage technology to offer innovative and more customized products to their customers. 

3️⃣ Focus on customers

Traditional banks have legacy, funds, customer base, and physical presence that provides assurance to their customers. Neo banks lack these elements but they strive to differentiate themselves with innovative products and features to serve their customers more quickly and conveniently

______________________________________________________________________________________

- Author of this article is Abhinav Paliwal CEO of PayNet Systems, one of the leading White Label Digital Banking and Payments Solution Provider. ( www.paynet.pro)