Finance and banking are no exception in a world where digital technologies are transforming every service and product. Neobanks arose as a result of the transition in consumer interactions from actual bank branches to internet banking. If we search up the definition of a Neobank, we’ll discover that it’s a digital bank that doesn’t have any physical locations and only functions online. They offer various financial services and products, including asset management, money transfers, and lending, brokerage, debit and credit cards, and more.
Customers can access all of these services via the Neobank website or mobile application from the convenience of their office or home. Whether or not a neobank has a banking license determines whether it offers financial services through a partner bank or on its own.
This factor is sometimes used to draw a contrast between a ‘digital bank’ and a ‘neobank,’ where the former does not have a banking license and the latter does, but we’ll use both names alternately for simplicity.
Surf constantly monitors the fintech industry and has created mobile apps for cryptocurrency exchange and international banks. Because neobanks are a subset of fintech, it’s only natural that we keep an eye on the latest solutions and market trends offered by the industry’s leading companies. In this post, we’ll look at some of the most well-known neobanks, how they differ from traditional banks, and how to build one.
Table of Contents
- Greatest Neobanks in 2021
- People prefer neobanks to regular banks for a variety of reasons
- Where traditional banks still have an advantage
- How To Make A Neobank Application
Greatest Neobanks in 2021
Let’s start with a look at the top digital banks and what they have to offer their consumers right now.
Chime is a prominent neobank in the United States, with more than 12 million members. Chime derives money from interchange payments made by retailers with whom Chime clients make purchases. Therefore it delivers free financial services to its consumers with no transaction or monthly costs. The main advantages of utilizing Chime are that you can get your income up to two days ahead of time, you can withdraw cash fee-free from around 60,000 partner ATMs, and you can get a $200 debit card overdraft.
The corporation puts much money into its mobile banking software, including features like quick money transfers, numerous notifications, and transaction block settings for specific transactions. Chime subscribers also receive a 0.50 percent annual percentage yield (APY) on their money.
Varo is a San Francisco company with no physical bank branches. That was the first US neobank to be granted a national bank charter, which came with a slew of regulatory requirements and effectively turned into a “real” bank. The company offers zero-fee neo banking services and cashback and numerous exclusive offers from Varo partners.
Users can also get their salary two days ahead of time. Varo also provides the most satisfactory interest rates on direct deposits, with APYs as high as 3%. The neobank has approximately 3 million bank accounts, with annual deposits increasing by 900 percent.
Nubank is a Brazilian fintech firm that is one of the world’s largest neobanks. Nubank has around 40 million customers as of June 2021, with the figure likely to rise: the neobank’s target market is unbanked and underserved Brazilians, who account for roughly 30% of the country’s population 211 million people.
Nubank accounts are divided into two categories: NuConta and Conta PJ. The first one is for personal clients, and the second is for corporate clients. Both accounts are free to open, and Nubank offers very affordable withdrawal and transaction rates. These advantages, along with a modern-looking app built with the Flutter cross-platform framework, are an apparent reason why Nubank is one of the fastest-growing fintech businesses.
Monzo, a UK-based neobank, has more than 5 million customers and offers fee-free banking services such as ATM withdrawals, money transfers, account opening, and card issuance. Users can earn up to 0.70 percent interest on their savings and set up direct debits for bills and other services through the bank.
The Monzo mobile app offers a modern user interface. It provides real-time transaction notifications and works as a budget app: users can create personalized ‘Pots’ to save funds for different goals and invest extra change from rounded-up payments. While presently only available to residents of the United Kingdom, Monzo has started beta in the United States, ambitions to make the service open to all Americans soon.
Of course, no list of neobanks would be complete without Revolut, a well-known fintech business founded by Ukrainian and Russian entrepreneurs and headquartered in London. The company bills itself as “the UK’s leading financial super application” and claims to have garnered over 14.5 million subscribers since expanding to EEA nations, Japan, Australia, the United States, and Switzerland.
Individuals can use the company’s financial services, and it also operates as a commercial neobank for corporate clients. Multi-currency cards, which reduce typical fees when spending abroad, and accessibility to stock trading and cryptocurrency exchanges set Revolut apart from its competitors.
Also read: Open A SEPA IBAN Account for Business
People prefer neobanks to regular banks for a variety of reasons
Neobanks are beginning to pose a serious challenge to traditional banks with physical branches, with around 40 million customers globally and fast-rising. Let’s look at the advantages and disadvantages of having a standard and a digital bank account.
What neobanks excel at:
Neobanks save money by operating entirely online, avoiding the expenditures of maintaining branches, offices, staffing, and ATMs that traditional banks incur. Because of the resources saved, neobanks can offer cheaper withdrawal and transaction fees while remaining profitable. Neobanks are particularly appealing to the underbanked populace in developing countries since they have no monthly commissions and are pretty inexpensive.
Convenient mobile apps
Neobanks have a “mobile-first” approach, focusing on rapid and easy interactions between the bank and the consumer using an app. That not only allows clients to manage accounts from the convenience of their own homes, but it also provides a wealth of information about where, when, and how they use the app.
A digital bank can utilize this information to conduct predictive analysis to aid fraud prevention and credit rating.
Faster account opening
Neobanks provide a more simplified onboarding procedure, including instant digital ID verification, linking a card to Google Pay or Apple Pay, and requesting more minor details once the account is approved. Customers can begin using financial services much more quickly, thanks to the methods above. Compared to First Direct or Nationwide banks, opening an account with Monzo or Revolut takes 2 to 3 times as long.
The transition from paper to digital documents has a less environmental impact, and neobanks are entirely digital. The goal is to make managing digital documents on a mobile app as handy and straightforward as leafing through a stack of pages.
Easy document management may be achieved in the banking industry, known for extensive red tape, by building user-friendly interfaces. Surf designed a customizable home screen for Rosbank’s corporate banking app that highlights the most commonly used services and allows quick access to a separate tab with documents that can be filtered by amount, status, date, and other criteria. Users can produce invoices using existing templates in three clicks using the repeat capability.
Neobanks employ AI to assess credit ratings more quickly and simplify the time-consuming loan application procedure. For example, the fintech business SoFi (Social Finance) allows users to prequalify for a loan and check their interest rate in minutes.
The notion of swift processing also extends to foreign money transfers, which may take up to a week with a traditional bank. But, with digital banks, all superfluous holdups are eliminated, resulting in a fast transaction time.
Where traditional banks still have an advantage
Traditional banks may be a better option for those who are not tech-savvy or prefer to speak with a live person, as they can visit a bank’s office and receive in-person assistance.
Because neobanks are all very new businesses concentrating on what they can do better than the traditional banks, some do not offer the complete variety of financial services that a consumer would expect from a typical bank.
As not all neobanks have full banking licenses, it might be challenging to determine who is accountable for any losses caused by software failure or fraud. But, as neobanks evolve, such regulatory and legal difficulties will almost certainly be resolved in the not-too-distant future.
How To Make A Neobank Application
Any neobank’s flagship offering is a mobile application. In eliminating actual offices, the app serves as the company’s “face” and a vital interaction tool with users. A fast and stable application with adjustable features and a user-friendly UI is as essential to Neobank’s success as a terrible app is to its failure.
If you’re thinking about creating a neobank, one of your first goals should be developing a smartphone application. An overview of the primary steps you should take to begin constructing a neobank app may be found below.
1. Market research and business analysis
Learn about current market trends and existing solutions. Investigate the services provided by competitors. That will help you establish your target customer and your neobank’s unique product, which will distinguish you from most other fintech businesses.
Fintech firms are subject to stringent legal requirements, with each country having its own set of rules. Starting your neobank as a local service for inhabitants of one country and progressively scaling the business is the most excellent way to go.
As previously said, neobanks provide benefits that are particularly appealing to developing countries. Therefore establishing a business in the Middle East and North Africa may yield more outstanding results.
2. Select the correct technology
There are two primary approaches to creating mobile apps. Using the Kotlin and Swift programming languages, you can create two independent native apps for Android and iOS or build a cross-platform app with a single codebase for both platforms.
While native apps have the lowest chance of bugs and deliver the highest performance, a cross-platform app is a cost-effective alternative that requires only one development team. Surf, for example, used the Flutter cross-platform framework to create an app for cryptocurrency trading platform Twim.
It required an intuitive and responsive user interface that would appeal to both crypto enthusiasts and experienced traders and would not freeze in the middle of a trading session.
3. Select your development team
To build complex fintech software, you’ll need skilled developers who have worked on fintech projects before. While employing a local team may appear the most straightforward option, it may not be the best.
The developer’s geographic location heavily influences the final price of an app. For example, a developer’s hourly wage in the United States can be over $100, but rates in Asia or Eastern Europe are half that amount without sacrificing code quality. Read our article about the ideal places to employ developers.
4. Estimate costs
Many factors determine the final price of an app, including the technologies used, the app’s functionality, and the developers’ pay. Developing a banking app ranges from $250,000 to $500,000 due to stringent security, third-party interfaces, and complicated architecture. Check out our article on what factors influence the cost of designing a banking app for more information.
5. Create a minimum viable product (MVP)
An MVP is a workable version of an app with the most crucial features stripped away. This prototype will assist you in gathering customer input, locating investors, and determining what to tweak and enhance without blowing your entire budget. After an MVP has been approved, work on a full-scale version of the app can begin. Read more about MVP for startups.
6. Release and Improve
After reviewing the data from MVP testers, the developers enhance every part of the software, including integrations, functionality, and design. QA engineers are working on finding every issue and fault at the same time. You’ll end up with a fully functional app that’s ready for public release.
Neobanks’ next challenge will be to transition from rapid, short-term expansion to a successful, long-term business plan. The COVID-19 pandemic demonstrated that contactless payments and digital banking services are here to stay and that cash payments and visits to bank branches would be phased out over time.
The desire for adaptive banking solutions would grow, and another neobank that offers better old services and wholly new ones will undoubtedly find an audience and a position. If you’re considering starting a neobank, consider investing in a mobile app for your customers, as it’s one of the most critical aspects of success.
Surf has more than ten years of experience designing mobile apps, including several for the financial sector. Fill out the short form below, and we’ll be happy to give you an estimate and go over the details with you.