As the world advances in the age of the internet, every service is now readily available online. This holds true for the banking sector as well. The transition of many banking services to the World Wide Web is evident through the increased presence of banks on the internet.
You can now use various banking as well as non-banking service providers to access the required services in a blink of an eye. There is no need for you to physically visit a bank branch in order to process any banking services.
Neobanks are online banks that are super convenient. When compared to the traditional methods of banking, neobanks have created a huge difference.
What are Neobanks?
Fintech firms that exist to provide their financial services exclusively online are called neobanks. They do not have any physical presence in the form of bank branches. Customers can use websites or apps operated by neobanks to access these services from anywhere. Some of the services that neobanks offer are digital savings accounts, money transfers, payment services, and financial education tools such as budgeting software.
What is a Traditional Bank?
Traditional banks are well known for their wide range of services, reputation in the economy and physical presence. The bank branches help the customers to access their services, the most important of which is administering the money customers have deposited in the bank. Due to their long history as proof of existence, traditional banks have a strong identity within the socio-economic and political world. Besides keeping the money, traditional banks offer lines of credit, financial advisors, credit cards, investing services, and more.
Difference Between Neobanks and Traditional Banks
- As we mentioned earlier, neobanks operate completely online. They do not have any physical establishments, which is an upside of neobanks, as they are available everywhere through the internet. Whereas traditional banks are accessible both online and physically through their branches.
- Neobanks provide personalised solutions for all your banking problems through artificial intelligence. Automated suggestions, easier account openings, payments around the world, and 24×7 support put neobanks in the high-rated category in terms of customer experience.
- If we hold a comparison of traditional banking vs neobanks, traditional banks have a far wider range of services available for customers with their legacy of branches and financial offerings. In order to offer a wide range of products and services, traditional banks employ an integrated approach, which includes having both a physical (through branches and ATMs) and a digital banking infrastructure.
- With lesser financial services and faster servers, neobanks are able to cater to you immediately whenever you need them. The evolving digital banking is now possible through the implementation of fast-paced processing. Digital banks complete all formalities swiftly without you having to visit any bank branch multiple times.
- Through the years traditional banks have built a long-lasting foundation of trust with each of their customers. They are backed by a standing legacy and their meaningful tie-ups representing the financial community. Customers who have been using the banking services actively find traditional banks more trustworthy.
Why Do People Use Neobanks?
The benefits of neobanks have garnered popularity over the years as they are user-friendly and cost-effective. They help lower the cost of banking processes significantly and make the services affordable for everyday use. Along with better interest rates on existing digital savings accounts that we can open from the comfort of your home, the list of neobank benefits is huge.
They are a revolutionary step towards a digital finance world. While traditional banks have their advantages, a large number of younger customers are attracted to the convenient banking resources of neobanks.
Things to Consider About Neobanking
There are as many cons as pros of using neobanks thus, there are some things we should consider before getting into the latest technology. Neobanks are not a good fit for people who are new to using AI-based applications for everyday transactions. It is better if you start slowly alongside a traditional bank account so that you can learn the process on your smartphone or desktop.
Neobanks do not have as many services as your usual traditional bank, such as loans, credit and debit cards, retirement funds, etc. If you are looking for a service provider that fulfils your needs beyond the basic account, checking, and transactions, then you should opt for a traditional bank.
They are also less regulated, that is, in case of any financial crisis, your deposits may not be insured. Check with your bank if it provides deposit insurance to protect your money against any financial crisis.
Neo-banks are a result of the banking industry’s evolution, and they have a secure future thanks to the various ways in which they outperform traditional banks in terms of services. As the new generation relies on their smartphones for every small thing, neobanks will soon emerge as a replacement for traditional banks completely. People would eventually start using neo-banks rather than regular banks, and this would happen shortly. Until then, it is an interesting sight to see and observe the changes our financial and banking sector undergoes.