• Fatema Ebrahim

The Era of Neo Banks

We have all heard of the term ‘Neo Banks’ or the other term would “Robo Banks” which in simple terms is a type of direct bank that is 100% digital, and they offer digital or mobile-only financial services. To understand this from a customer perspective, a neobank is most likely an application that helps you manage your money and make decisions. The banking app is quite simple, with a user friendly dashboard that helps you ‘bank’ easily, and in a smarter way.

However, just to clarify - these neobanks are not really banks, and would need a handful of licensed institutions to conduct business. However, millions of global customers have adopted new digital-only “challenger banks” as their bank of choice. In a Tech savvy world, you are able to do basic banking tasks, manage your finances, and have a preventive feature that helps you bank smarter based on your activity.

Why are Neo Banks quite successful recently? Let’s look at the top 3 reasons. First, They have low cost. Products, and usually come with no monthly maintenance fees. Second, they are transparent, and often only let you spend what you have with no hidden charges. Third, they have simpler approval processes, and can offer more competitive cash-flow based lending products to their small business market.

However, with every disruption - there are factors to be aware of. As much as Neo Banks seem like the ideal solution for the new age customer, the current landscape isn’t completely compatible for this shift.

Firstly, the current laws and regulations aren’t well-defined processes, for the banks and the customers themselves. Neo Banks have to be heavily regulated, and supervised. Actually, several regulatory bodies have to find a way to accommodate this new way of banking. The key is to find a balance between being regulated and not ruining the digital experience for customers as well.

Second, Neo Banks will be quite restrictive in their initial offerings and mostly will only have deposits, lending, and savings until they start adding more services once there is enough clarity on the processes, and how to truly make them digital. Third, Neobanks are still in the evolution process! Even though we know there’s a huge opportunity for this space, we need to be aware of all the changes.

Do we have a Neo Bank in Bahrain? Recently, Arab Banking Corporation (ABC Bank) has launched its mobile-only challenger ila Bank! The neobank is offering users an instant virtual card for online transactions, “flexible” funding options, in-app card controls and accounts which will allow customers to store money in foreign currencies and earn more interest the more they save. In addition, a ‘digital DNA customer assistant’ called Fatema is linked to the challenger bank to answer customer questions through

its website 24/7.

Let’s see that the future holds for the. inevitable rise of the robo-banks.

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