Neobanks, fintech firms offering services traditionally provided by banks to retail customers, are committed to ‘unbundling’ the banking sector and keeping the profitable bits. With around 400 neobanks worldwide, serving approximately one billion customers, the size of the neobank market is $47bn in the US and is expected to be worth $722bn by 2028.

AI-Powered Analytics and Open Banking

The rise of AI-powered advanced predictive analytics is helping millions of customers access affordable finance and manage their money better. Banks worldwide are planning to spend an extra $31bn on AI embedded in existing systems by 2025. Virtual assistants and chatbots are being used across the sector to answer customers queries around the clock. When combined with open banking, AI models can examine an applicant’s financial history by looking at much broader data sets than those used by most traditional credit-scoring algorithms.

Self-Service Tools and Digital Wallets

Banks have been offering customers ever more control over their financial affairs in recent years through the provision of self-service tools such as saving pots and in-app budgeting functionality. Digital wallets and e-cards have simplified the payment process and
rendered it frictionless. The rise of embedded finance and open application programming interfaces has enabled many non-financial businesses to offer financial products via smartphone apps.

Neobanks: A Seamless Digital Experience

Neobanks offer a seamless digital experience and personalized services tailored to the needs of young digital natives. They don’t have costly branches, offering instead lower fees, higher interest rates, and swift sign-up processes. Traditional banks are losing their grip on customers, with an ensuing fragmentation of their relationship with them.

Pandemic Accelerates Shift to Digital Banking

The pandemic has accelerated the trend of depositors turning to digital banking. Neobanks have won hearts and minds by offering services that became popular during lockdowns, such as cryptocurrency trading and peer-to-peer payments. As the world continues to embrace digital solutions, neobanks are poised to disrupt traditional banking and shape the future of personal finance.