Neobanks, or digital-only banks, are gaining popularity around the world for a number of reasons. One of the biggest factors is the increasing convenience and accessibility of online banking. With neobanks, customers can manage their finances and make transactions anytime, anywhere using their smartphones or other devices. This makes it easy for people to bank on their own terms, without the need to visit a physical branch or wait for business hours.
Another reason for the growth of neobanks is the increasing dissatisfaction with traditional banks. Many people are frustrated with the high fees and poor customer service of traditional banks, and are looking for alternatives that can offer a better banking experience. Neobanks, with their digital-first approach and focus on customer service, are able to offer a more modern and personalized banking experience that resonates with many consumers.
In addition, neobanks are able to offer competitive products and services that can compete with traditional banks. Because they are not tied to the legacy systems and infrastructure of traditional banks, neobanks have the freedom to experiment with new technologies and services. This allows them to offer products like high-yield savings accounts and low-fee investment options that can be more attractive to consumers than what traditional banks have to offer.
Finally, the growth of neobanks is being fueled by increasing investment and support from the financial industry. As more and more people switch to online banking, traditional banks and financial institutions are starting to take notice and are investing in neobanks and other digital banking technologies. This is providing neobanks with the resources and support they need to grow and expand their operations. Neobanks with their innovative services and lower costs have been a darling of Venture Capitalists (VCs) and funding institutions.
Since the pandemic and forced digitalization in every sector, the customers are more open to online banking and used to the new age banking models. Evolving customer expectations have given rise to a new breed of banks called neobanks. The neobanks operate exclusively online without any physical branches with modern technologies like artificial intelligence (AI), automation and cloud computing which enable them to offer highly personalized services at lower costs.
The global neobanking market size was valued at USD 47.39 billion in 2021 and is expected to grow at a compound annual growth rate (CAGR) of 53.4% from 2022 to 2030. This is a massive business opportunity and a lot of untapped potential that still exists and is ripe for disruption. We will see a lot of new players coming in to serve individual, enterprise, and other segments. We will also see innovation from these new age financial institutions serving different niches.
There are various USPs and use cases of neobanks and the players in the industry are coming up with innovative solutions to address the market needs right from services, such as credit management, transaction management, and asset management. Neobanks are filling in the gaps that traditional banking never cared for and are a win-win for the industry, customers and all other stakeholders who get more financial inclusivity and better services and products.
Overall, the growth of neobanks around the world was being driven by a combination of factors, including convenience, dissatisfaction with traditional banks, competitive products and services, and increasing investment from the financial industry. Post the pandemic, neobanks have started to lose their sheen as questions are being raised about their modus operandi and being on the wrong side of the regulations. As more and more people switch to online banking, we can expect to see neobanks continue to grow and thrive in the coming years, but they do need a reputable partner who can bring back the trust and faith that is fast getting eroded as the traditional banks jump into the fray as their competitors.
If you are a neobank or are in the process of starting a neobank and want smooth sailing, get in touch with us. We have a full fledged solution and technology stack to get you started on your journey of being a successful neobank.