You don’t have to use banks to transfer the money necessary for every hobby you like doing (for example, playing online slots at GGBet): you have many alternatives to do this. However, we are not talking about electronic wallets or prepaid cards. Although these are practical methods, it is not possible for them to reach the variety and quality of services offered by traditional banks. We are talking about an alternative that allows you to use all the advantages of traditional banks with a single mobile application – neobanks. You can find everything you wonder about this impressive and exciting technology below.
What Is a Neobank?
What comes to mind when you think of a bank? A big building, lots of branches, countless employees and a huge bureaucracy, right? You must go to the bank to handle many transactions (for example, opening a new account), and some “human” must verify all your transactions. Well, this sounds boring and inefficient. What would you think if we told you that there was a technology that let you use all the advantages of a bank wherever you are without any “physical” interaction? That’s exactly what Neobanks promise.
Do not confuse Neobanks with mobile applications of traditional banks, as they are completely different from each other. The mobile apps of traditional banking allow you to do some transactions from your mobile phone, but that’s all: these applications still cannot overcome the cumbersomeness and unnecessary bureaucracy of banks. Neobanks are very different because:
- They have no branches. They still have a headquarters due to banking laws, but this is not like traditional banks, for example, you cannot go in and open an account.
- The number of human workers is very few. Customers can perform all their financial transactions through digital channels without the need for anyone’s support.
- Even transactions that normally require you to go to the bank can be done online. For example, opening a new account only takes a few minutes. You can complete all the verification processes with your phone.
It would be correct but insufficient to describe Neobanks as digital banks: This technology offers much more than digital banking. They have a seamless user experience and do not have the cumbersomeness of traditional banks. Moreover, they are not backed by big financial companies: neobanks are almost entirely built and operated by startups.
Don’t confuse them with an electronic wallet either, as they can do more than just send and receive money. You can apply for a loan with Neobanks, get interest on your investments and even open a checking account, for example. Every service you can find in traditional banks is also offered by Neobanks. Revolut and Chime are the most common examples of neobanking, and they already have a huge customer base.
Advantages of Neobanks
The biggest advantage of Neobanks is, as can be guessed, convenience: as long as you have a mobile phone, you can use banking services anywhere in the world. You no longer need to go to a bank branch: you can manage your money, take out loans, use credit cards, and more, all with your smartphone. This is actually an advantage for the banking system too, as they can make incredible profits by reducing the number of employees and closing branches completely. But being practical isn’t the only advantage of Neobanks. They represent a real revolution, especially for third-world citizens. The banking systems of third-world countries are controlled directly by governments and have many absurd restrictions. The government can at any time seize money from your bank account without justification or prevent you from transferring money to a specific person/country. For this reason, a large proportion of third-world citizens do not open a bank account. As Neobanks will not be affected by such restrictions, they offer great advantages and enable people to re-enter the financial system.
It’s also a promising technology: traditional banks fail to meet the expectations of Generation Z. Their dependence on bureaucracy keeps the new generation away from them, and Neobanks are a real alternative when electronic wallets fail. Everyone agrees that this technology will continue to grow, and new Neobanks will emerge. In other words, neobanks are not just a “cool thing” that becomes popular for a short time and will soon disappear: they are influential enough to determine the future of the banking industry.
Disadvantages of Neobanks
The fact that neobanks are a service offered only by startups naturally causes trust problems. If you have a problem, who will solve it? You can contact customer service via email and live chat, but that’s all: being outside of the traditional banking system also means that Neobanks are not subject to certain rules that secure customers. Today, almost anyone can start collecting money by claiming to have founded a Neobank, as long as they write “this is not a bank” somewhere on the website in lowercase.
In other words, Neobanks have almost no legal status, as existing laws are designed with only traditional banks in mind, and for the same reason, they are independent of the legal mechanisms created to supervise traditional banks. Existing laws need to be renewed quickly to include Neobanks, but it is impossible to say when this will happen. Except for Australia, no country has taken any steps in this regard. However, one thing is for sure: Neobanks are here to stay, and they will shape the future of the banking system.