Today, it seems like every traditional bank is plagued by ATM issues, bureaucratic entanglements, and bad press, so it should come as no surprise that customers are starting to look into other options. Now, non-bank fintech startups are creating digital-first or digital-only platforms that offer a greater value proposition than traditional banks, often with low or no-fee services. These startups are known as neobanks.
What Are Neobanks?
Neobanks are fintech companies that offer software, apps, or other technologies that streamline online and mobile banking. Unlike traditional banks, most developers specialize in offering one specific type of financial product. Marketing firms like Elevated help them get the word out to potential customers who then move one specific aspect of their banking experience over to a new app.
Appropriately enough, these fintech startups are also referred to as challenger banks. This alternative name is appropriate given that neobanks are currently in the process of transforming the banking sector. In the United States, established neobanks are attracting millions of customers each year.
How Neobanks Work
Every business has to make money if it’s going to succeed. However, neobanks typically operate on different business models than traditional alternatives. While large, established banks often charge exorbitant fees, neobanks tend to make more of their money from interchange rates. Because they are paid by merchants, rather than customers, even the fee structure of neobanks offers a solid value proposition.
Venture capitalists have also been investing significant amounts of funds into neobanks over the past ten years. As a result, popular apps have seen their valuations skyrocket. Because most neobanks operate primarily or entirely online, they have lower overhead costs to contend with and can focus instead on passing savings on to customers.
Neobanks vs. Online Banks
It’s relevant to note that neobanks are not the same as online banks. Online banks are chartered and tend to provide a wider array of services, including not just checking and savings accounts but also loans.
The development of the neobank industry has, however, had an impact on online banking. Many established banks have begun to improve their own products or unveil new ones to compete with these new competitors. Many traditional, brick-and-mortar banks have done the same.
How New Neobanks Are Established
Because most neobanks offer very specific services, there are plenty of opportunities for app developers. Of course, not all neobanks succeed, but those that do produce a good deal of value for developers and investors alike. Successful neobanks tend to have a few things in common. They:
- Create unique value propositions
- Differentiate their brands from the competition
- Engage with target audiences to create a more personable experience
- Keep fees low by keeping costs low
Once app developers have come up with new ideas, there’s still a ways to go before they gain traction in the fintech world. The best way to start is by engaging the services of specialized marketing firms to get the word out about new neobank offerings.
Join the Neobanking Revolution
Average consumers are switching their accounts over from traditional banks every day, and fintech app developers are rising to meet their changing needs. Skilled developers stand to make a good deal of money through creating neobanks and other fintech apps, but time is of the essence in this competitive market. Get the app up and running and get the word out right away to maximize the chances of success.
Troy is an editor, book coach, author of over 32 novels and several works of non-fiction, and the education lead for Plottr. He lives, works, and plays in Boise, Idaho.
Passionate about writing dark psychological thrillers, he is an avid cyclist, skier, hiker, all-around outdoorsman, and a terrible beginning golfer.
