With technological advancements, things are going remote and completely digital. No one would have thought that an organization with hundreds of employees working there could operate without any physical infrastructure. But work from home and hybrid workplace culture has made it possible. Similarly, apps like Byju’s have taken the education system online, where no one attends a physical school or classes but has classes on their mobile devices.
So, Neobank is a similar transformation for the banking and financial institutions. Let’s know everything about this concept and what it holds for you.
Brief About Neobanks
Neobank is the new banking concept that provides all the financial services just like a traditional bank but has no physical presence. The overall operational process of Neobanks is centralized on mobile apps and software. Customers get all the facilities similar to a traditional bank, including deposit, withdrawal, loan, investment, and everything else.
Difference Between Neobanks and Traditional Banks
Both types of banks provide mainly the same services; still, there is a big difference between Neo and traditional banks. Let’s understand this difference by entertaining the different components-
1. Neobanks Don’t Have a Physical Presence
Physical presence is the most significant difference between a traditional bank and a Neobank. While conventional banks are all about their physical branches, you can not find even a small office of Neobanks. Later operates entirely in the digital format, providing all the services via mobile apps and software. By skipping the physical infrastructure and its maintenance, Neobanks save many costs.
2. Neobanks Are More Affordable
As discussed earlier, Neobanks save a lot of cost by eliminating the physical infrastructure from their process. It allows them to offer all the services at comparatively low charges. You can easily find Neobanks with no opening fees, low maintenance costs, no minimum balance requirements, no hidden fees, higher interest on savings accounts, and much more.
On the other hand, talking about traditional banks, you have to pay a fee for leveraging the different services.
3. Neobanks Are More Relaxed
Neobanks generally provide more relaxation in delivering their services. Unlike traditional banks, it is much easier to sign up and open an account in neobanks. At the same time, neobanks don’t have extensive credit history checks. So, it is much easier to get a loan from neobank when compared to traditional banks.
4. Traditional Banks Have More Services
Traditional banks overtake the neobanks when talking about the number of services. Neobanks are in their inception stage, while conventional banks have been there for decades. So, currently, neobanks are able to provide only limited services to their customers.
5. Traditional Banks Have a Wider Reach
Neobank is a new concept, familiar to few people, while traditional banks have succeeded in marking their presence among the population for a long time. Thus, traditional banks have a wider reach compared to neo-banks. However, neobanks are also attracting the consumer base toward itself and can give competition to conventional banks in the near future.
|Technology||Purely digital relies on technology||Physical branches and digital services|
|Accessibility||24/7 through the internet or mobile app||Limited branch hours and in-person visits for some transactions|
|Customer Experience||Focuses on user experience and simplicity||The bureaucratic and complex process|
|Fees||Lower or no fees for common services||Higher fees for common services|
|Product Offerings||Limited range of products, expanding||A broad range of products and services|
|Regulation||Subject to the same regulations, lack of clear guidelines in some areas||Established regulatory framework|
|Data Security||Strong emphasis on digital security||Protects customer data but may not have the same level of investment in digital security|
|Number of services||Limited||Wider range|
Rise of Mobile Neobanking: Facts and Figures
Random theoretical statements might not convince you or anyone to develop a neobanking app. But, real-time data, facts, and numerical figures can be a better ground to witness the growth of new banking concepts. So, let’s dive into the numerical insight of new banking concept-
- According to Grandviewresearch, the global neo-banking market size was valued at USD 66.82 billion in 2022.
- The market is expected to execute a CAGR of 54.8% from 2023 to 2030.
- Moreover, the transaction value in the neobanking segment is expected to reach USD 4.53 trillion in 2023.
- This transactional value is expected to show an annual growth rate of 18.25% between 2023-2027.
- The highest transaction value per user in the Neobanking segment has been observed in the US, with an average value of $18.08k.
- In 2023, the United States alone contributed a transaction value of $1,426 billion.
- The neobank segment’s user base is expected to reach the milestone of 376.89 million by 2027.
NeoBanking App Business Model
There are currently three models of operations for Neobanks-
1. Operations with Full Banking License
Banks need a certain license from their government to operate as full-fledged banking entities. Many neobanks worldwide have received these operations licenses from their respective governments and now are operating in no different manner from conventional banks. There are some countries that provide independent bank license to neo-banks as well. For example, Great Britain and Australia.
2. Cooperation with Other Banks
There are a number of countries that do not provide independent bank licenses to neobanks. For example, the Reserve Bank of India has specified that it is necessary to have the physical presence of banks in order to get the license. Being a digital entity, Neobanks don’t pass the criteria and can not be issued with a license.
So, neobanks in such countries cooperate with existing traditional banks to get the license and provide their services.
3. Mixed Model
When a neobank has a license to provide limited types of services to their customers but has to partner with conventional banks to provide other financial services, it is called the Mixed model.
Exploring the Revenue Sources of NeoBanks
Revenue sources of neobanks are different from that of traditional banks. Conventional banks mostly make money by lending loans and earning interest on that loans. Neobanks, on the other hand, do not rely on such income. The revenue sources for neobanks are as follows-
1. Transaction Fees
Many neobanks offer debit cards to their customers and charge a transaction fee. Here, Chime, a renowned neobank in the United States, is the perfect example to understand this monetization model. The bank offers Visa Debit cards to customers. Whenever a user makes a transaction using the card, Visa charges a certain percentage as a transaction fee. A fraction of this fee is paid to Chime by Visa.
2. Credit Card Charges
Just like debit cards, some banks offer credit cards to their users. The bank charges a specific fee for each transaction whenever the card is used for any transaction. You can refer to Nubank, a neobank based in Brazil with more than 40 million users has offered a credit card to their customers and charges a minimal fee for each transaction.
3. Traditional Income Sources
Not the majority, but some of the neobanks make money from the same sources as conventional banks. For example, charging an account opening fee, ATM, interest charges on deposits, interest charges from loans and lending, etc.
Renown Names in Neobanking Landscape
Chime is one of the biggest and most popular neobank in the US market. According to Insiderintelligence, the bank has over 21.6 million users which leverage the services provided by the bank regularly. The bank is known for its extraordinary benefits to customers, including no monthly fees, early access to paycheck, fee-free overdraft, credit built, 60,000+ fee-free ATMs, high yield saving account, sending and receiving money, security and control, and much more.
Varo offers significant advantages to its user base, such as no credit check, minimum balance, monthly fee, overdraft fee, and thousands of accessible ATMs. Varo is a US-based bank, operating entirely digitally and delivering similar services to a traditional bank. Varo bank users are also offered a Visa Debit card that can be used for all kinds of monetary transactions. As per Insiderintelligence, the bank has over 5.4 million users.
3. Current Neobank
Similar to the previous one, this bank is also established in the US and provides Visa Debit Card to their users. Being a Current Neobank customer, you can leverage a lot of services and benefits provided by them. The benefits include early paycheck, free overdraft protection, earning points on swipes for cash back, 40,000+ free ATMs, Gas hold removals, instant mobile check deposit, round up for easy automatic saving, buy & sell crypto without trading fee, and much more.
Aspiration is a digital-first financial institution that offers banking and financial services to its customers via a mobile app. The core aim of the firm is to provide an ethical, transparent, and sustainable banking experience, with a focus on social as well as environmental impact. The customers of Aspiration neobank can leverage the services like checking accounts, debit card, investment options, and savings account. According to Insiderintelligence, the firm has over 4.5 million customers.
Key Features of a Successful Neobank App
Neobank is all about what customers can do with the dedicated mobile app. In such a scenario, the Neobank’s features become vital, so customers don’t have to compromise with the facilities. Let’s glance over some admin panel and customer panel features of the neobank app, with their cost impact and advancement measure.
|Features||Admin Panel||Customer Panel||Type||Cost Impact|
|User Management||✓||✖||Basic||Low to Medium|
|Transaction Management||✓||✓||Basic||Low to Medium|
|Customer Service||✓||✖||Basic||Low to Medium|
|Reporting and Analytics||✓||✖||Advanced||Medium to High|
|Fraud Detection||✓||✖||Advanced||Medium to High|
|Mobile Banking||✖||✓||Basic||Low to Medium|
|Budgeting and Expense Tracking||✖||✓||Basic||Low|
|Card Management||✓||✓||Basic||Low to Medium|
|Notification and Alerts||✓||✓||Basic||Low|
|Integrations with 3rd party services||✓||✓||Advanced||Medium to High|
|Customizable User Profile||✖||✓||Advanced||Medium|
|Bill Pay||✖||✓||Basic||Low to Medium|
|Overdraft Protection||✖||✓||Advanced||Low to Medium|
Benefits of a Neobank App
Neobanks belong to the new age since it delivers many benefits to customers. However, when developing a neobank app, it is necessary to deliver the same benefits to the owner as well. Following are some of the benefits that bring a good business to the app owners-
Convenience is the foremost requirement of customers in 21st century. Neobanks are definitely another name for convenience providing services 24*7 irrespective of location. So, these banks are preferred by customers as they don’t have to visit the location physically in order to leverage the benefits.
2. Better Customer Engagement
Due to the mobile services, customer engagement with the neobanks can be achieved seamlessly as it carries no paperwork, waiting in the queue, or unnecessary formalities. All a customer has to do is open the app and enjoy the services.
3. Enhanced Financial Services
Neobanks provide similar services to a traditional bank, but with advanced features; for example, customers can track their budgeting and expenses, set saving goals, monitor credit scores, and much more. So the customers can experience better the financial services they utilize.
4. Lower Operating Costs
Neobanks have lower operating costs as a significant expenditure on physical infrastructure is eliminated from the process. With this upper hand, the banks can provide better offers to their customers, enhance brand loyalty and enjoy profits.
5. Improved Data Insight
Neobanks have good access to customer information, such as buying behavior, preferences, and buying capacity. This data can be used and shared with businesses to provide their customers a personalized experience. At the same time, Neobanks can make good money from the same.
There are many other benefits that neobanks app delivers to its owner; thus, developing such a banking app can be a great business opportunity for one looking for an investment option.
How to Build a Neobanking App?
First, ensure you are connected to a reliable and experienced app development team to build the neobank app. Such a team goes through the following seven steps to develop a neo-bank app-
1. Defining the Requirements
First, you will have to define all your requirements about the app to the development team. A project manager and product owner must be present in this phase to fully understand the app. The topics like technology, features, platforms, vision, monetization models, etc. are discussed at this stage.
2. “Click Dummy” Based on Ui
Having discussed all the requirements, the development partner will showcase a “click dummy” to you. This model visually displays the feature prototype in the form of mockups and wireframes. Moreover, you can see the visual representation of product’s UI, navigation, along with the overall look and feel.
3. Proof of Concept (POC)
After “click dummy”, the team will present the “proof of concept” which displays the small-scale demonstration of product functionality and the technical feasibility of product’s design. It is used to address the technical challenge with the design and correct it.
4. Minimum Viable Product (MVC)
Having passed the previous two stages, MVC is delivered to the client which is a stripped-down version of the product. It includes the feature of the actual product and is used by the certain users to know the experience and gather the feedback
In the fifth step, the app’s core development process occurs. The major tasks such as back-end, front-end, UI designing, and entire coding is completed in the development process. Other than that, compiling documentation and creating and launching a base of automatic tests occurs in this step.
6. QA Testing
Once the app has been developed, Quality Assurance (QA) test is conducted to ensure that the app runs smoothly with the installed technology and doesn’t carry any bugs. The test is coordinated to facilitate the seamless functioning of the app after deployment on the relevant platform.
Having completed all the above stages, it is time to deploy the application on the relevant platforms. Make your app available to the target audience by deploying it on the Google Play store, Apple App Store, or other platforms.
Tech Stack for Neobank Mobile App Development
Tech stack is the framework on which the whole app is based on. A top-notch neobank mobile app can be developed using the following tech stack-
|Front-end development||React Native, Xamarin, Flutter|
|Back-end development||Node.js, Ruby on Rails, Django|
|Database||MySQL, PostgreSQL, MongoDB|
|Cloud Infrastructure||AWS, Google Cloud, Microsoft Azure|
|Payment Gateway||Stripe, PayPal, Braintree|
|Security||Secure Socket Layer (SSL), two-factor authentication|
|Project Management||Jira, Trello, Asana|
Keeping up With the Latest Trends in Neobank App Development
The competition in the 21st century has increased to the next level. To achieve competitive advantages, businesses tend to have USPs that can attract customers. Similarly, when developing a neobank mobile app, equipping it with some advancements can turn the game toward you. Here are some of the ideas that can take the efficiency of your neobank mobile app a step ahead-
Buying lands in the metaverse has been a topic of discussion in recent years. With the massive investment in the concept by Mark Zuckerberg, people are waiting to witness the experience. However, when neobanks are not meant to have physical branches in the real world, you can build the branches for your neobank in the metaverse. Be it the real world or virtual, you can ensure a place where customers can feel the experience of traditional banks with a digital bank.
When developing a banking app, the foremost concern is going to be security, for customers as well as owners. Ensuring the implication of blockchain in your neobank can take its security to the next level, providing a more reliable and better experience to your customers.
3. AI and ML
Artificial Intelligence and Machine Learning, when equipped in the mobile app, can streamline the processing and encourage a personalized customer experience. The implication helps better respond to customer queries, feedback, and problems, and it even learns about customer behavior and provides services accordingly.
Building a Mobile App with OpenAI APIs: Unlocking the Potential of AI for Mobile Development
What Is the Estimated Cost of The Neobanking App?
The cost of neobank app development depends on various factors; thus, it is impossible to stick to an actual app price. To get an idea about the cost of neobank app development, you must have a complete vision and blueprint of the app ready with you. The following factors are going to determine your cost of app development–
- The country you are hiring the developers from
- Features you want to instill in your app
- The time it takes for the developers to develop the app
- The platform you want to build your app for (iOS, Android, or both)
- The time to launch the app
- Type of theme you want to use (free or paid)
- The experience and pricing of the app development team.
However, to have a rough estimate of the price, a basic app with fundamental functionalities can be developed in $10,000 and can go beyond according to your requirements. For a more accurate pricing, feel free to contact Emizentech.
We offer a free 60-minute consultation with our market experts where you can discuss your app idea and get the right guidance.
How Can Emizentech Help You?
As we interpreted earlier, selecting the right app development partner for your project is important. Your app’s efficiency and performance will depend highly on the team. Emizentech is a leading app development company and the best fit for your neobank mobile app development as we carry an experience of more than a decade in the industry. In this long app development journey, we have received different types of projects, successfully delivered them, confronted the challenges, and learned to overcome them. Now, we are a team of 200+ developers, more than 50% of which are experienced and senior staff.
Life has become hectic, and everything which requires the physical presence of customers is experiencing a downfall in performance. Consumers are adopting online services where they can benefit from a few taps on their smartphones. Neobanks do the same for their customers regarding banking and financial services. These banks don’t have a physical presence but provide all the services of banks via a mobile app. From opening a savings account to getting a loan, debit card, or credit card, these banks cover all the services offered by a traditional bank.
Developing such an app can be a great business opportunity as it attracts a broad consumer base toward itself in a concise time frame. Emizentech invites you to be part of this banking and financial services evolution with your Neobank app.