November 11, 2023
As digital banking becomes a more adopted part of the financial sector, established financial institutions must keep up as people seek faster, more modernized, and efficient ways to organize their money. Incumbents within the banking industry face heightened competition from thriving digital banks and other challenger banks that have long challenged the status quo in financial services.
Neobanks keep expanding thanks to state-of-the-art technology, including artificial intelligence, robotics, and machine learning, significantly boosting the customer experience and attracting increased attention from traditional financial institutions, as well as established enterprises. However, resistance to change, coupled with a struggle to adapt to digital transformation, has prevented traditional banks from innovating and providing the kind of robust services bankers demand in this day and age. There are several digital banks trends that traditional financial institutions should adopt in 2022, upgrading their business models to offer more secure, inexpensive, and customer-friendly services.
Like other digital solutions, neobanks were created to make banking more convenient and add much-needed agility to the financial services space. The customer experience for traditional banks has waned for some time, focusing too much on gaining a competitive advantage and not enough on providing personalized services and innovative solutions customers can trust.
Banks that offer Banking-as-a-Service especially understand the need for personalization, partnering with neobanks and fintech to provide enhanced banking experiences. The banks offer the services while their partners handle the customer experience, making them more nimble organizations.
The digital models that neobanks follow stress convenience for customers, facilitating faster banking and services that bankers can easily access from their mobile devices. With a fully online onboarding service, eliminating physical touchpoints, digital banks improve customer acquisition rates while fighting chargebacks to add value to customer acquisition.
Platform usage is easier thanks to the fully digital setup of neobanks
Additionally, traditional banks and large enterprises alike optimize their customer orientation. Neobanks consistently emphasizes how their platforms look and feel, creating relatability and ease of use for their customers. Digital banks focus on making their systems as intuitive and engaging as possible, being sharper and fully iterated to handle even the most complicated customer needs.
Traditional banks should consider partnering with neobanks to offer more customized solutions while improving their customer resolution efforts, becoming faster and more efficient as they cater to evolving banking needs.
Another pro of neobanks is that they offer smart, advanced reporting capabilities with an increased reliance on technology. With their enhanced reporting capabilities, neobanks consistently offer updated account details, providing highly personalized, sophisticated financial advisory services for customers. By doing so, customers have the leeway to make more insightful financial choices and smarter investments that ideally complement their budgeting/saving goals.
Partnering with neobanks allows traditional financial institutions to capitalize on the increased reliance on improved technology, providing quicker iterations to improve their reporting.
International transactions are enhanced thanks to neobanks
Traditional banks have encountered their fair share of struggles with their international payment structures because of the extensive fees and overelaborate processes. By contrast, neobanks have long adopted universal transfer rates for their international payment services as well as their upgrades. Whenever international payments must be made, digital banks make the payment process as seamless as possible.
Traditional financial institutions should make cross-border payments easier for their international customers. Countries like India have seen neobanks improve the efficiency and delivery of international payment services through the increased presence of neobanks, reducing and eradicating frustrating processes like complicated documentation processes, high currency exchange markups, and formatting issues between local and overseas banks. Adopting digital transformation upgrades every process involving cross-border financial transactions and documentation, making banking smarter and faster.
Neobanks is also becoming renowned for their cost-friendliness, another reason why they continue to be a threat for many traditional financial institutions. Part of the reason digital banks are relatively inexpensive is because of their reduced operational costs, not having to worry about physical branches, extensive legacy infrastructures, or any credit risks. As a result, neobanks typically come with few (or no) fees attached to them, featuring transparent pricing and simple sign-up processes. This is why, according to a 2021 fintech report, over 30% of Americans use online-only banking.
Furthermore, neobanks pave the way for faster financial product launches as they solely rely on third-party joint ventures and partnerships to create advanced customer solutions. As a result, neobanks operate with a digital ecosystem that’s highly tolerant of risks and is more agile in handling customer requisitions. Partnering with a neobank helps traditional financial institutions to embrace robust solutions that get products from ideation to launch quickly.
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