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One could surely perceive digital banks as the product of banking system’s evolution. Yet, the amount of neobanks that continues to increase has caused much noise related to their disruptive nature that has the power to fully revolutionize the existing order of things. For instance, the well-known industry players such as Revolut and N26 have been successful in developing a unique value proposition, being as user-friendly in terms of app interface as one can imagine and creating engaging communication tools. However, has all of this truly brought around disruption?
No doubt that the services offered by neobanks are indeed fully customer-centered; user experience, needs and expectations are key parameters that guide the operation of such companies and that can distinguish them from traditional banking institutions. Despite that, it is difficult to differentiate the actual banking business model behind the screen of the app, just because objectively the typology of products that is being offered by digital banks corresponds to the one provided by old-school banks (e.g. accounts, transfers, loans etc.). The aspect that often gets less attention in the comparison is the price competition point, where mobile banks are definitely far ahead of their traditional counterparties. The ability to compete in the price sector is gained thanks to the simplification of the distribution channel and the elimination of need to construct and maintain a complex network of facilities. Therefore, in terms of attractive costs neobanks surely score higher.
In most of the cases, neobanks have no aim to eventually grow into banks, acquiring all the traditional attributes of the concept. Many are much more focused on continuously improving their platforms, which are often based on AI-led technological advancements and developing more powerful solutions in-house. Besides, digital banks exhibit overall higher transparency and communicate with the users in their own simple and comprehensible language.
Today, fintech platforms offer various innovative products like optimized savings and investment decision and management tools, as well as many other solutions that were previously exclusively accessible to a limited number of customers. These solutions are developed and executed in full compliance with the existing regulations, which not only ensure security, but also allow for a better individual profiling and matching with the suitable product. Again, much of the latter is made easy and optimized thanks to the help of AI and open APIs that are both currently trending in the industry. Precise analysis of user persona and activities one performs online, all carried out within the limits of the legal framework, allow digital banking services providers to ensure higher personalization of the output, creating tailor-made solutions that users can truly benefit from. Consequently, what truly allows digital banks to bring around disruptive changes is proprietary platforms and AI technology that can be crucial for innovating the business models in place and not simply upgrading the customer service side. The formula is simple: if you want to be a game changer, invest in technology and people who can help you and your clients benefit from it to the fullest extent. Leveraging the power of technological advancements in the industry before other neobanks or traditional banking institutions do is where the real disruptive power is hidden.