EASY GUIDE ON HOW TO START A NEOBANK IN 2023
The rise of online banking and digital transactions has dulled the luster of traditional banking, as most customers now prefer to deal with their mobile phones. A neo-bank is a financial institution that exists purely in the digital realm, serving its customers via a mobile app and facilitating communication with them through a variety of online chat services. Despite the fact that neobanks offer many advantages, such as speed, convenience, and efficiency, very few have adopted them.
This is because investing in the neobanking industry necessitates not only hiring a specialized mobile app development company, but also significant capital and familiarity with the concept. This article will explain what a neobank is, the outlook for the neobank market, and the steps necessary to create your own neobanking app.
What is Neobank and its Workflow?
A neobank is an online bank that operates completely online and has no physical brick-and-mortar locations. While not technically a bank as it requires no banking license, a neobank offers the standard suite of banking products and services online. Neobanking services include loans, investments, savings accounts, and credit cards. Since we live in a digital era, clients have higher expectations, which Neobanks works hard to provide. When compared to conventional banks, neobanks excel where others fail. Consumers that are adept with technology have found this idea helpful in terms of budgeting. Since neobanks are entirely web-based and don’t maintain physical locations, they can significantly reduce expenses.
Neobank’s Outlook in 2022
Banking services are no exception to the trend of app-based services that have emerged as a favorite among consumers in 2022. The emergence of neobanks has brought attention to the critical need for change in the traditionally staid banking services industry. Perhaps you still need to make the connection, but neobanks play a significant role in the financial services sector. According to research, the worldwide neobanking market was worth $34.7 billion in 2020. The analysis predicts that between 2021 and 2028, the new industry will expand at a compound annual growth rate (CAGR) of 47.7 percent. The number of people using neobanks was growing rapidly even before the epidemic, but the spread of COVID-19 has sped up that growth. It would appear that neobanks are already reshaping the banking landscapes, which will have far-reaching consequences for how banks interact with their consumers in the future.
The common misconception that neobank is solely useful for tech-savvy millennials is unfounded. Users between the ages of 25 and 44 make up the bulk of Neobank’s clientele (58% male and 42% female). However, a growing segment of the 65-and-up elderly population is also learning about and enjoying the benefits of technology.
One or more neobanks can be found in virtually any country today, provided the country has a reasonably advanced digital technology infrastructure. Monzo, Chime, and Revolut are popular neobanks and key players in the market. Downloads are highest in the EU, the UK, and the US.
Launching a NeoBank in 2022: Is It Worth It?
Yes! The global demand for neobanking services, particularly in the United States, Europe, and Asia, is expanding rapidly. In Europe, the neobanking market is predicted to expand at a compound annual growth rate (CAGR) of 53% from 2022-2030. Over sixty million Americans used neobanks in 2020, and that number is projected to rise to over eighty million by 2025. The proliferation of mobile banking, the uptick in remote workers and independent contractors, increased digital banking usage, especially among young adults, and the growing dissatisfaction with traditional banking are all factors fueling this expansion.
Some advantages of neobank app development that ensure the project’s viability and quick return on investment include
- The very high deposit interest rates give them a special appeal as a financial investment;
- Higher adaptability than conventional banks;
- Innovations in financial analytics;
- An unoccupied market segment;
- The ability to easily interact with customers is a major selling point;
- Easy and quick loan processing;
- Low or no service charges;
How Do Neobanks Differ from Traditional Banks?
- Traditional Banks are physical establishments that usually have physical mortar-and-brick branches. Neobanks, on the other hand, are online-only, mobile-first financial services that ‘walk and talk’ much like a bank.
- Neobanks are very streamlined, easy to use, and technologically friendly. When you open the app, you might see that the neobank only does a few different things, but it does them well. Whereas, despite the convenience of in-person assistance, traditional banks can take longer than neobanks to answer client complaints. Their process also involves a great deal of paperwork and bureaucracy, which may be inefficient and time-consuming.
- Traditional banks charge a lot in commissions and service charges. Neobanks give a random percentage of cashback, don’t charge monthly overdraft or ATM fees, and cover fees charged by out-of-network ATMs.
- Neobanks are not banks; most of them have no or partial licenses. They work with chartered banks to provide FDIC insurance to their customers. Traditional banks, however, must have full and proper bank licenses to operate.
With the rise of online branches of traditional brick-and-mortar banks, the distinction between the two is gradually dissolving. Executives from traditional financial institutions realize they must modernize their systems to keep their customers. However, rapid transformation is typically impossible due to their massive corporate systems.
Steps to Building a Neobank from Scratch.
A neobank, like any other type of financial instrument, requires careful forethought and processes tailored to the desired outcomes. Steps to a successful neobank app development include
- An idea that you can develop into a viable business is a huge advantage.
- Carrying out a qualitative and quantitative competitor and market analysis
- Researching your target audience
- Recruiting a Skilled Group of Administrators and Programmers
- Creating a Most Valuable Player (from UX Design prototypes to testing and deployment)
- Launch your product to the public
- Get Opinions and Feedback
- Focus on improvements and fixing mistakes.
Things to Note during Neobank app development
It is easier to make a long-lasting product by first paying close attention to the smallest details. Before you set out to create a neobank, you must carefully consider the following.
Security and Confidentiality
Security is of paramount importance in neobanking. Neobanks must take stringent safety precautions because they handle personal information. To achieve this goal, you can encrypt the data stored on neobank’s servers. Two-factor authentication is another method for keeping information safe. Neobanks also need a group of security professionals always looking for new ways hackers could attack the neobank. Additionally, they need a plan ready to handle a security breach.
Speed and Integration
Since neobank is an online app, making a payment should only take a few taps rather than requiring the user to fill out numerous fields. Integration with the most common payment methods in the region is also necessary for the payment mentioned earlier to function optimally. However, keep in mind the need for security while integrating new systems into your code, as doing so increases the possibility that your client’s personal information will fall into the wrong hands.
It is important for any neobank that wants to operate legally first to seek a banking license, after which it must follow all the rules that traditionally apply to banks. You can get this information from your country’s regulatory agency. The time and money required to acquire a banking license are substantial. In most cases, you’ll need to show that you have sufficient money, manage a predetermined minimum quantity of assets, and are otherwise in good standing.
High-Quality App Interface and Infrastructure
There are a few must-have components for any neobank app development. Your platform must have a solid back-end architecture capable of handling the volume of transactions processed. You must provide a straightforward interface for your clients to follow. The significance of a positive and pleasant user experience is immeasurable. To assist you in this endeavor, we, as a top-rated mobile app development company, have provided a tried-and-true technology stack for developing neobank apps.
Important Features of a Neobank
What elements must it have to keep the user engaged with your app? Below are some prominent features of a neobank.
- Services (loans, credit, etc.)
- Bills Payment
- Unique CVV2
- Goal-based reports on expenses and savings
- Referral scheme
Despite having the word bank in their name, neobanks are not banks and are not pretending to be. Neobanks may not be able to displace the traditional banking system completely, but they can be a formidable alternative. The youthful generation now has access to a banking option that is both flexible and easy to use, thanks to neobanks. Neobanks have a lot of great additional special features and benefits as well. They encourage savings and investment while addressing the sore issue of wasteful spending.
A lot of people want to start a neobank but are faced with numerous barriers to entry. True, neobank app development comes with many inherent risks, just like any new business. However, if you care about new technology and financial services and want to cater to customers, the discussion changes to finding the easiest way to start a neobank.