Remember Neo from the mind-blowing movie ‘The Matrix’, Most of us loved that movie a lot, especially when things got heated and Neo decided to pick the red pill from Morpheus to reveal the lie he was living within.
Neo was the one, the savior of our world when humankind faced a crisis threatening its existence. Neo was able to decode his environment and see the truth of everything around him.
How does this relate to our topic?
What happened in that movie is very similar to what happened to the banking sector back in 2008 (during the famous financial crisis) which suffered a huge loss of millions of jobs and trillions of dollars' worth of financial capital. The blame mostly resided with the banking sector and the individuals that got rich from laissez-faire regulations and speculative investments. At that time the level of confidence in the banking sector went very low, creating a remarkable opportunity for some startups to act as Neo and save the world.
So, let’s take the red pill and discover the new world coming next
The rise of Neobanks
A new kind of digital-only financial institution known as ‘Neobank’ has emerged to capitalise on the negative feelings toward the banking industry. Neobanks are 100% digital and use apps and online platforms to support their customers, unlike the traditional physical branches. Something that wasn’t going to be possible to rise without the phenomenon of what’s called Open Banking, which allowed institutions other than traditional banks to be able to process financial flows.
Open Banking and the lack of trust in traditional banks have motivated Fintech startups to create and offer their own financial services by collaborating with payment issuers such as Visa and Mastercard.
Differences between Neobanks and Traditional banks
Neobanks aim to replicate what traditional banks offer in an innovative way, they have well understood the importance of smartphones in our daily life that’s why they developed their full digital system on mobile applications to act as the main interaction with users. With Neobanks the procedure of opening bank accounts can take just a few minutes compared to up to 15 days with traditional banks.
Neobanks offer banking services at a different level with a digital mindset, each process of all the services is 100% digitised so users can do everything through a website or a mobile application. Saving such costs of operations and physical branches allows bigger investments in improving online services, AI and risk assessment tools.
At the end, young generations grew up within a digital world using their smartphones to manage almost everything, that’s why it’s not a surprise that they would go for Neobanks as the savior or the one.