As our lives continue to become more digital, consumers are fuelling the omnichannel revolution and expect a frictionless experience in every aspect of their life, including banking. To stay relevant, sustain growth, and compete, financial institutions must overcome fragmented channels and close the online/offline divide, but how?
The rise of neobanks
With the rapid emergence of agile and flexible neobanks, they have been able to adapt to market and customer changes rapidly by adopting AI, machine learning and open banking to constantly innovate. With leaner operating models, which enable faster time to market, these banks focus on simplicity, speed and transparency and leverage customer data to personalise services.
In addition, neobanks usually partner with fintech companies to offer value-added services such as automated savings, investment options and real-time spending information that respond to changing customer needs and preferences.
Neobanks are an example of success in a digital banking space. In light of continuing bank branch closures, these banks have enabled a democratisation of the sector and so have improved financial inclusion. By enabling those with limited or no access to traditional banking services, neobanks allow them to take advantage of essential financial tools, such as digital payments, savings accounts and access to credit.
But what about traditional banks?
Different from neobanks, traditional banks started their journey with a physical presence on high streets. Through this they were able to establish their customer base and brand, and therefore create a sense of loyalty, which is important during uncertain times.
With the rise of neobanks and a technology-forward approach, legacy banks did not sit idly by. Instead, they grasped the value of innovation as a strategic lever to survive and grow. The implementation of cutting-edge self-service technology offers a flexible alternative to customers and uses remote human assistance as an alternative to digital-only banking. This improves customer experiences and allows traditional banks to remain competitive.
Neobanks vs traditional banks
With customers being able to access both traditional banks, be it in a branch or online, and neobanks, they are not forced to choose between them. This trend has significantly grown in recent years and is driven by the volatility of financial markets. Due to this uncertainty, customers can open and access bank accounts at both traditional banks and neobanks, so they can differentiate risks and seek alternative services and products that better meet their needs.
Changing customer demands has also driven more competition within the banking sector. It has forced digital transformation for traditional banks, who now see technology as an ally to improve their operations and services they offer to their customers.
It is no longer a battle between digital and traditional banking models. Rather, customers have the choice of using traditional banks, neobanks or both, but their choice is dependent on their needs and how well the bank can respond.