The Neobanking Revolution

With the events in the former half of 2020 shaking the consumer experience, many of us have turned to the online world to purchase goods and services. This is true, also, of banking. With Neobanks being on the rise since 2017, they have streamlined the user experience by removing physical branches entirely, relying wholly on the world of Fintech. Fintech is considered a modern movement, yet it is the financial industry introduced credit cards, internet banking, and contactless technology.

With that in mind, a Neobank relies entirely on digital apps and online platforms to support their customers. Support through these services alone gives the impression that a huge of amount money must be saved by Neobanks in eliminating the physical model. Just to show how much money is being cast off by banks into maintaining a physical presence, a typical branch in Hong Kong can cost up to HK$1million to rent a space. Along with that, an additional HK$1million is used to subsidize the wages for, on average, 40 accountants, bankers, and cashiers.

These huge sums of money simply don’t seem conceivable during the convenience era that has been accepted largely due to the effects of COVID-19. The angle they’re taking is that by keeping costs low, the savings on these overhead costs can be passed on as benefits to their customers. These benefits include fee-free accounts, user-friendly features, and competitive interest rates on deposits. As identified by Accenture, 58% of small business’s identified low fees as the main criteria for selecting a banking partner, while only 34% are interested in partnering with what’s normally considered an “established financial brand”. There is a huge wave of people ready to partner with what’s not traditionally considered an orthodox bank.

Thankfully, as profound as Neobanks seem to be, they can in fact be legally considered an established bank once they hold a requisite license from their respective country that they are based in. Other Fintech branches such as micro-investment apps and money management tools, can’t consider themselves a bank until they have a license. An example of one of these would be Revolut: while it offers banking services, it’s only slowly becoming an official bank as its accounts are still waiting to be regulated by the FSCS. However, this shouldn’t deter your considerations, as Revolut is one of the leading digital banks with the huge number of services it provides and partnerships it has with license holders.

Banks worldwide have been slow to innovate and seem unconcerned by the new entrants to the market.  However, traditional banks are currently in a bigger wrestling contest with the Neobanks than they initially anticipated.

Ian Wright, the founder of, stated: “Over the past two years, we’ve seen an influx of consumers choosing Neobanks or challenger banks as an alternative to traditional banks that we are all so familiar with. With consumers preferring to avoid the hassle of bank branches and paperwork, Neobanks’ are becoming increasingly popular with banks such as Revolut and Monzo showing huge market share growth in just a few years.”

The rapid adoption of branchless banking by millennials, MSE’s and niche clusters of customers, such as freelancers who have fluctuating earnings, paired with the embracement innovative technologies, are just some of the factors that have contributed to the success of Neobanks. Traditional banks will continue to embrace technology and are still widely used, they aren’t exactly facing their Blockbuster video moment yet. However, they can either strike a middle ground partnership with Neobanks and build a newer form on infrastructure, or continue to consider Neobanks “disruptors” to the market.