Neobanks Explained: How do they work and make money?

 Neobanks Explained: How do they work and make money?

Neo Bank is an online-only bank that does not have any physical locations. If you want to be a customer-focused bank, this is the industry for you. The financial ecosystem is being actively de-mystified by fintech companies like these.

The innovative capabilities of Neo banks allow consumers to manage their money just using their mobile phones. Furthermore, neo banks offer a wide range of banking services, including fund transfer, loans, mobile-first financial services, and much more, at lower costs and faster speeds than traditional banks.

Is Neobanks Legal?

Technology platforms, such as mobile apps, are used by neobanks to supply consumers with financial products comparable to those offered by traditional banks. For instance, they can provide financial services, including savings accounts, bank transfer choices, a cash account, as well as others.

Most neobanks raise money from investors, merchants and customers, and other unconventional methods. Neobanks also save a lot of money on maintenance and rent because they don’t have a physical branch location.

Do neobanks have any effects?

Neobanks have been able to target vulnerable or underserved consumer categories by becoming more flexible as well as accessible than incumbents due to the fact that they started from scratch. Migrant laborers, for instance, like the services provided by Monese.

Further market segmentation is being driven by Neobanks and other FinTechs as well. Most businesses begin by offering just one type of service or product to their clients. It is possible for them to exceed banks in terms of customer service, product offerings, and profit margins. Habito for foreclosures and Revolut & TransferWise for foreign payments are prime examples of this. Instead of being concerned regarding new entrants, incumbents have relied on the assumption that their size or product variety will allow them to compete. However, if new competitors continue to draw clients away from such revenue-generating regions, they may begin to struggle. Click here to know more about the more detailed effects of the neobanks in today’s economy and financial sector. 

Neobanks have a better reputation with customers than traditional financial institutions.

There is little doubt that Neobanks are powered primarily by large investment deals, as we have previously discussed. However, even if the number of consumers is one of their key performance indicators, businesses cannot afford to stop at client acquisition. Instead, a company’s long-term viability is on its ability to keep its customers happy.

The consumer is supremely important to Neobanks. That’s why they’re sometimes referred to as “customer-centric” banks, because everything they do is focused on what their customers want and need, and they get constant input from them.

Unsurprisingly, the outcomes are a direct result of this customer-centric approach to business. Neobanks have 90 percent customer satisfaction in the United States, compared to only 66 percent for such top 50 global banks, according to recent U.S. polls.

How Neobanks make money?

Neobanks have indeed been effective in attracting a loyal following of customers who value their offerings, such as free ATM fees and high return savings accounts. Nevertheless, this has also led to some neobanks feeling the wrath of their consumers when they have changed their pricing or implemented additional levies. Many neobanks are struggling to make a profit since they’ve been relying on freemium services to attract clients. Could they pivot to subscription without alienating their customer base? When it comes to making this transformation, non-banks should focus on offering best-in-class financial solutions to clients. For all this, neobanks must keep their basic banking system nimble enough so that they can swiftly develop and introduce new offerings in order to stay competitive, and they should avoid becoming slaves to their technology.


 In today’s world where technology is digitizing almost everything, the neobanks came up as the best solution for the banking system. With the current speed with which the neobanks are growing it will be no surprise that it will become much more common in the coming years, 

Ruth Hill