Neobank Vs Digital Bank: Fintech Revolution Redefine Banking

Technological advancements and new inventions are occurring every single day and at a very fast pace. These inventions simplify our lives and make our tasks easier and simpler. The neobank is one such invention which has brought a paradigm shift in the banking sector.

There has been a lot of confusion among the general public regarding neobank and digital banks. The neobanks and digital banks are two different concepts. Both banks differ from each other in terms of functioning and working. In this blog, we will understand the difference between neobank and digital bank.

What Is A Neobank?

The neobanks are financial service providers that do not have a physical branch. These banks operate online and provide various banking services to their customers, such as transfer money electronically, pay bills, and receive direct deposit or mobile check deposits. These banks provide a seamless online banking experience to customers.

Due to their tech-savvy nature, these banks allow customers to undertake banking functions such as opening new bank accounts, undertaking savings, depositing money, and other banking functions themselves without any kind of intervention from any third party. The neobanks have grown at a very fast pace in the past few years.

According to Statista, the neobank market size grew from $34.77 billion (USD) in 2020 to $47.1 billion in 2021. This growth is expected to continue exponentially, with a predicted market size of $722.6 billion by 2028.

Also Read: How To Start A Neobank

What Is A Digital Bank?

The digital bank can be defined as the digitalization of traditional banking services. These banks offer digital banking services to their customers. The banks have a physical presence along with offering digital services. Digital banks provide banking services to customers through various channels, such as banking software, apps or websites.

Difference Between Digital Banks & NeoBanks

Even though both the neobank and digital banks operate online, there are many significant differences between their working and services. Here we have given some major points involving Neobank Vs Digital Bank

Licensing And Regulation

The licensing and registration play an important role in the functioning of the banks. The neobanks and digital banks differ from each other in terms of licensing and registration.

Range Of Services

The type of banking services offered by both the banks differs from each other. They might have a few services in common, but the range of services differs in them.

Also Read: Digital Twin Of Bank In Metaverse

Availability And Accessibility

The availability and accessibility are the major criteria on which we can differentiate between digital banks and neo banks. The accessibility of banking services and their availability is different in both the types of  banks.

Customer Experience

Customer experience is an important factor that determines the success of banking organizations. The neobanks and digital banks differ from each other in terms of the customer experience they provide to their customers.

Cost Efficiency

Reducing the operational cost is the best way to make your bank more profitable and improve its financial health. This factor creates a huge difference between the neobank and digital bank.

Innovation

Innovation is the key driver that has made neobanks more popular as compared to the traditional banks. The emergence of innovation has led to the overall growth and development of the banking sector.

Also Read: White Label Neo Banking Platform

Benefits Of Opening A Neobank

Are you looking for a profitable opportunity in the banking sector? Well, investing in neobank would prove to be a great opportunity for your business. Given below are certain benefits your business can avail if you open a neobank:

Lower Operational Cost

The operational cost becomes a major barrier if you plan to open a physical bank. You will have to incur expenses on buying land, hiring employees, and creating a banking infrastructure and incur other types of operating expenses.

But in the case of neobanks, you do not have to incur such operational costs. You can easily operate your business online at a very reasonable operational cost. A lower operational cost will enhance the profitability of your business.

Wider Accessibility

Financial literacy has increased up to a great extent. This has created the need for banking services. By opening a neobank, you can easily connect to a larger section of customers without facing any geographical restrictions. You can increase the customer base as well as the popularity of your neobank easily and efficiently.

By opening a neobank, you can provide your customers with 24/7 accessibility to banking products and services. This will help you maintain a higher customer retention rate.

Increased Flexibility

If you open a physical bank, you would have to abide by many regulations, and making infrastructure changes could be a costly and time-consuming process. This refrains businesses from making new innovations.

But in the case of neobank, adding new products and services is easy and simple task. You do not have to incur infrastructural or other heavy expenses while making innovations. You can add new services to your catalog and enhance your customer's banking experience.

Faster Business Transactions

The customer banking experience is influenced by the time their request is being processed. In the case of traditional banking, due to limited physical mobility, the banks require more time to process your transactions.

But in the case of neobanks, every activity is conducted online, and there are no locational constraints. Whether the customers wish to transfer money, deposit money or open a new account, it can be done in a few seconds in a neobank.

Enhanced Customer Experience

Customer experience plays a crucial role in determining the success of a banking institution. The neobanks operate on an online basis. Customers can easily perform all their banking activities without going anywhere by sitting at their homes.

The neobanks provide users with a great and fast banking experience. This will help your business gain a higher level of business growth. 

Also Read: Metaverse Banking Software Development

Summing Up

Neobanks and digital banks seem to be the same but are very different in terms of functionality and services. To understand the difference between the two, you need to understand the basic meaning and workings of these banks.

The neobanks are a modern banking concept where all the banking transactions are performed on a virtual platform such as mobile banking app or website. These banks provide an exclusive banking experience to the customers and make it easy and simple for them to undertake their banking activities seamlessly.