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.
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
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.
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
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.
|In order to open a digital bank, proper licensing and registration is mandatory. The digital banks require a mandatory license granted by a concerned authority.
|To operate a neobank, no licensing and registration are required. These banks can partner with the banks which are licensed in order to provide banking services to their customers, such as deposit of funds, loan offerings, and other banking solutions.
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.
|Unlike traditional banks, digital banks provide a huge range of banking solutions, starting providing business loans, corporate credit cards, cash management services, trade finance services, and much more.
|The neobanks offer a specialized range of banking services that are designed to cater to the specific banking needs of the customers. These banks offer services such as accounting, invoicing, and payment solutions, expense management tools, etc.
Also Read: Digital Twin Of Bank In Metaverse
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.
|The digital banks provide 24/7 banking services to their customers through an online mobile banking app and website. Many Digital Banks provide global accessibility to their customers.
|The Neobanks are completely online based banks. They provide many online banking services to their customers through a banking app and provide an intuitive and seamless banking experience to their customers.
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.
|The digital banks aim to offer a satisfactory customer experience by offering them an excellent banking experience by offering a huge range of banking solutions. That can cater to each and every customer's banking needs.
|The neobanks follow a customized business model focusing on the specific banking needs of the customers. This helps them provide a more enhanced and personalized customer experience.
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.
|The digital banks are more cost-effective as compared to traditional banks. Most of the services offered by them are online based. This helps to reduce their operating cost.
|The operational cost of the neobank is very lower. Being an online bank, they do not have any physical presence and do not require any infrastructure requirements. There is high transparency regarding fees and charges.
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.
|Although digital banks have made innovations in their products and services, they still face certain types of limitations. They might be bound by certain banking regulations.
|The neobanks are at the forefront of financial innovation. They can easily adapt to ongoing changes in the financial sector. They can easily add new products and services. This innovation will help transform the customer banking experience.
Also Read: White Label Neo Banking Platform
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:
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.
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.
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.
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.
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
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.