Neobanks is a relatively new concept that has only been around for a few years. Most people have never heard of Neobanks, as they continue to challenge the status quo and change the face of financing. Conventional banks have long held control over the money lending and savings sector all over the globe, but innovative new digital banks are starting to shake things up. This article will help you better understand this concept and how it differs from traditional money lenders.
Grasping the Concept of Neobanks
Getting to grips with the concept of NeoBanks is not that difficult. Basically, they are 100% digital lending institutions that operate online. For example, you can go for Nimble quick and easy personal loans without having to visit your local lender.
When applying for a loan using Neobanks, everything is done online. They make it incredibly easy to apply for financing as the application process is done digitally. The system will analyze the data you enter and assess your application. When they are happy with the application, you generally receive your funds that day, transferred into your personal account.
A Neobank is like a slimmed-down model of a traditional bank, where most of them offer simple checking and savings accounts. This model allows them to apply lower fees, making them more attractive to SME’s and individuals looking for small or short-term loans.
Different Between Neobanks & Conventional Lenders
There are many different types of loans, such as short-term, long-term, business loans, and more, and there are also many ways to acquire them. You can use a digital bank to apply for a loan, get in touch with an alternative lender, or go down the traditional route – banks & credit unions. There is a difference between Neobanks and traditional lenders, as most Neobanks don’t offer the same range of services as a bank or credit union.
- Low Costs – When you apply for a loan from an online lender, you are subject to fewer regulations in comparison to a traditional bank. The absence of credit risk allows them to keep their credit low, which cuts the cost for customers.
- Easy to Use – Although most traditional banks now have online apps, Neobanks allow you to do all of your banking digitally, as they operate without a physical premise. They make it easy to manage your banking online and perform a range of tasks without having to visit a lending institution.
- Processing Speed – If you have ever applied for a loan from a traditional bank, you will know that the process can be energy consuming and drawn out. There is a lot of paperwork to complete before you meet the criteria set by the lender. In addition, they don’t deal with people who have bad debt or zero collateral. Neobanks allow clients to quickly set up accounts and process requests.
- No Physical Branch – The most obvious difference between a Neobank and a conventional bank is that they do not have any physical branches, they operate 100% online. Banking online is incredibly convenient, that is why it has taken off. But many clients still like having the ability to bank in person and speak to a lending representative when they need it. Although many online banks offer useful transaction tools, some people just aren’t tech-savvy and cannot fully understand an online banking system.
- Tech Savvy – As mentioned, many banking customers like to visit a traditional lender, simply because they are not tech-savvy. Neobanks use innovative, cutting edge technology to manage and control finances. If you do not like to keep up with technology trends and you have trouble navigating basic online platforms, you may not like to use digital banking services. There is no reason to be cautious of Neobanks just because you do not fully understand the service they provide, when dealing with your finances, there are many ways to ensure sensible money management.
The Future of Neobanks
There are many good reasons as to why the future of Neobanks looks good. Research suggests that digital banks are on the rise and they continue to attract more and more clients each year. Over the last few years, there has been an influx of individuals choosing digital banks over the more traditional lending institutions. Many customers prefer to avoid the hassle of bank branches and paperwork, instead choosing to do everything online. The digital banking sector looks to now focus on expansion and offer customized features for more specific target groups.
There are many differences between traditional banks and Neobanks. Although they offer some of the same services, they rally to serve the underserved. Virtual banks continue to launch all across the globe every year and they are slowing chipping away at the traditional banking sector. They are focusing on segments of the market that have been left out – freelancers, small businesses, independent contractors, and more.