In 2022, neobank investors shifted focus from growth at all costs to profitability. Most of the world’s 291 neobanks were not able to turn a profit—and investors were losing patience. With the funding drought unlikely to abate, the future of neobanks is uncertain.
Industry pundits are already speculating whether neobanks can pivot quickly enough to survive. They’ll need to align their marketing strategies, products, policies, and customer support activities to drive profitable growth—while also bracing for regulation. Successful neobanks will emerge from the ashes leaner, stronger, and more efficient.
What is a neobank?
Neobanks aren’t saddled by traditional banking technology and costly networks of physical branches. Instead, all of their banking services are conducted completely online via desktop or mobile app. There are two types: a full-stack neobank or a front-end-focused neobank.
A full-stack neobank (like Varo) is a standalone bank with its own banking license and can operate completely independently. Comparatively, a front-end-focused neobank (like Chime) does not have its own banking license and must operate in partnership with either a traditional or legacy bank to provide its services to customers.
Benefits of neobanks
The top three factors that US checking account users considered before choosing their most recent checking account were fees, mobile banking capabilities, and online banking capabilities, according to EMARKETER’s US Account Opening Feature Demand Report 2023. Neobanks provide digital-first services as well as:
- Easy access: As neobanks are fully digital, they are accessible to customers any time, anywhere. Account opening can also be easier and quicker as some neobanks don’t check banking histories.
- Lower fees and rates: Since neobanks don’t have to maintain physical branches, they can offer lower fees and rates to customers. But there could be other fees requiring a certain number of transactions per month to get the best interest rates.
Source: Emarketer
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