Today, many people spend a lot of time researching the best digital banking services to secure their funds. While traditional banking is well known for providing financial services, new technology has developed new ways for customers to transact their money without going all the way to a bank.
This has been seen particularly in the case of a neobank solution – an online platform that provides digital financial services that are customized to customers.
What is a Neobank?
A Neobank is a digital tech-based company that does not have physical branches; instead, it offers online mobile services like debit cards, money transfers, payments, lending, and deposition of checks. It also partners with established financial institutions and can be customized to provide a specific set of banking services. Examples of neobank services include secure mobile transactions and personalized savings accounts.
The simplest way to start and build a Neobank is by having a licensed company and solicited investors. You must also apply for permits from relevant regulatory bodies to ensure you stay compliant with all financial laws.
The benefits of Neobank
In the last decade, there has been a growing interest in Neobanks. As an institution, its main objective is to offer an elevated customer experience that no traditional bank offers. The following are some of the benefits of creating a Neobank:
- Users can use and access neo banking services from remote locations at their convenience – at home, the gym, or at work
- Clients can access services from multiple devices, including smartphones, tablets, laptops, or PCs
- Quick and easy control over the state of your account
- Access to agents and banking officials on matters related to your account
- Guarantees confidentiality
How does a Neobank Operate?
Neobanks offers all its services online. This means consumers can open neobank accounts from any device, including mobile phones and laptops. The best part is that the financial platform comes with an application that is downloaded and installed on the preferred device. Once the application is installed, you can go through the setup process, which takes a few minutes, and you are good to go.
Neobank VS Digital bank
Differentiating Neobanks and digital banks can be challenging since they offer similar services. However, the main difference is that digital banks operate as a branch of a larger traditional bank.
On the other hand, Neobanks are not associated with any traditional banks; they are independent.
Steps by Step Guide on How to Start a Neobank
Step 1: Identify your target audience and value proposition
Understanding your audience demographics and developing a value proposition is the first step to creating a neobank. This helps provide a reason as to why your customers should choose you.
Defining your target audience indicates the Neobank’s status quo and payment for the audience. Neobanks such as Family and Zenpay cater to teenagers and blue-collared workers as their target audience.
Step 2: Analyse the audience points
Knowing your audience will help you analyze features that resolve audience issues, build trust and attract the right customers to your service. An example is Zenpay which came and pinpointed the challenges of the blue-collared workers who were underbanked and were unable to track their spending, set up salary accounts, or access loans.
Zenpay is mostly focused on its audience’s ability to open salary accounts or access other financial services. Identifying the needs of your target audience will help you curve your niche and provide services that meet its needs.
Step 3: Put effort into customer-centric strategies
One of the main factors you should consider is installing customer-friendly features. This way, you can add value and promote customer acquisition and retention.
Customer-centric strategies like affordable banking solutions, fast account creation, high yield savings, and card issuance attract and helps retain customers.
Step 4: Create a strong core and infrastructure
To create a reliable neo banking app, you need APIs, a card processing app, and back-office tools.
- API – connects your neobank app with other services.
- Card Processing App – is responsible for all the transactions or issues related to cards.
- Back-office Tools – Manages the neobank.
Step 5: Focus on experience designs
Prioritizing the experience designs is one of the best ways to elevate user experiences during the development of Neobank.
Your design should be able to integrate beauty and functionality, something that guarantees excellent speeds while appealing to the eyes. Work on optimizing your application’s interface and promote convenience and security.
Step 6: Manage advanced security features
Installing security features to protect customer data is key to the success of your Neobank. Financial institutions, especially digital platforms, are often targets of cyber-attacks. Setting up an elaborate security protocol to safeguard user passcodes and logins should be your top concern when setting up a Neobank.
You should run a security check on your platform, exposing it to numerous tests before launch. This way, you can solve potential security concerns.
Step 7: Deploy your Neobank
Once you are done with the security checks and tests, it’s time to deploy the platform. Keep in mind that a successful neobank requires regular changes to enhance user experience and expand the services offered. You can leverage banking software development to deploy new versions of your software to users.
Neobank Business Challenges
Neobank business faces several challenges, including:
- Erosion of differentiators- neobanks are finding it difficult to differentiate themselves from traditional and digital banking due to similar services
- Strict regulations- more regulations and government interventions make it difficult for neobanks to operate.
- Convincing enough people to switch
How much does it Cost to Start a Neobank?
The price to develop and deploy a neobank may vary depending on various factors. However, you need between 350,000 and 580,000 dollars.
These figures will enable you to get the bank off the ground and serve customers with basic features. However, you may spend a little more depending on the features you are looking to include.
The path to future banking is paved with innovative ideas such as Neobanking. Despite being at its infancy stages, neobanks have shown potential.