{"id":1705519,"date":"2022-09-29T10:47:06","date_gmt":"2022-09-29T14:47:06","guid":{"rendered":"https:\/\/wordpress-1016567-4521551.cloudwaysapps.com\/?post_type=station&p=1705519"},"modified":"2022-09-29T12:54:04","modified_gmt":"2022-09-29T16:54:04","slug":"neo-banks-innovation-and-trends-shaping-its-future-raj-chaudhary","status":"publish","type":"station","link":"https:\/\/platodata.io\/plato-data\/neo-banks-innovation-and-trends-shaping-its-future-raj-chaudhary\/","title":{"rendered":"Neo Banks: Innovation and Trends shaping its future (Raj Chaudhary)"},"content":{"rendered":"
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Introduction<\/b><\/p>\n

Neo banks are app based fintech firms which are customer experience-driven with focus on providing superior customer support and appropriate solutions. Neo banks came into picture to enhance the quality of traditional banking and to provide much needed improvement
\n in customer expectations. Every innovation, trends, opportunity in neo banking industry is focused towards achieving the best possible customer experience. Every neo bank in this planet is working hard towards achieving best CX. The neo banks provided users
\n option to think beyond traditional banking.<\/p>\n

Neo banks have not only been getting massive attention in the banking industry, but also heavy investments. Not just before the pandemic but also during the economic slowdown in 2021. According to an article \u201cAn
\n Analysis of FinTech VC Funding Mega-Rounds in 2021<\/a>\u201d published by MEDICI in March 2022, Neo bank holds close to 12% of total investment in 2021. Neo Banks raised $10 billion in 29 funding rounds. The US, UK and Brazil were the top investors.<\/p>\n

From the report it is observed that Neo banks are getting lot of attention and huge investments. Never ending innovation by neo banks is one of the reasons and they have been doing good even during the pandemic. Desire to do more and push towards achieving
\n excellence would help neo banks to attract more investments in the years ahead.<\/p>\n

Nevertheless, in the past decade, not many neo banks have been able to achieve great success. According to a report published by
\n
\nSimon-Kutcher: Only 5% of the neo banks across the world have achieved break even<\/a>. Some neo banks are losing $140 per customer annually. And it\u2019s not only because of the peers\/competitors in the industry. Ineffective product usage is one of the factors
\n behind their failures. It was observed that many digital customers are inactive after opening their account. The report further adds that superior customer experience alone is worthless unless combined with attractive loyalty programs. So, what neo banks have
\n done in the past decade is not enough. Neo banks need to innovate and overcome challenges to prove their mettle.<\/p>\n

Neo banks should bring in more innovative thoughts and strategies to improve their position in the market. Amongst many strategies, targeting niche segment could be one the important strategy. There is quite a few neo banks who are targeting niche segments
\n such as LGBTQ, Teenagers, Asian Americans, etc. Such kind of niche offerings would require more than just investment to survive in the cutthroat market where incumbents are already scanning to acquire niche neo banks. This could be one of the areas of improvisation.<\/p>\n

The thing which could help neo banks to overcome such challenges is innovation. Providing something unique in a most profitable manner is the real demand in the market. The product or service should be beneficial for both customer and neo banks. This blog
\n would focus on areas like Innovation, Challenges, Disruption and Profitability which the neo banks should pay attention to.<\/p>\n

Innovation in Neo Banking<\/b><\/p>\n

Technology is King<\/strong>: Technology has always been proven as a boon for the banking industry. Technology has helped neo banks to be more effective, efficient, and innovative. It is no hidden fact that technology has helped Neo Banks in reducing
\n cost and improve customer experience. Neo banks being all digital helps in automatically acquiring transactional data which would allow neo bank to focus more on innovative products and services. Integrating latest technology like Analytics, Artificial Intelligence,
\n Voice Interfaces etc. have transformed neo banks to maximize their potential. Integrating such technological advancement could help neo banks boost their customer experience. Technology would not only provide round the clock services, but it will also help
\n in providing resolutions in much faster and efficient ways. Technology would also help in determining the right financial services faster and hence overcoming the long wait.<\/p>\n

Banking with the Unbanked Population<\/strong>: Traditional banks have never focused much on the unbanked population for various reasons. Sometimes, there is lack of a formal ID, not having enough money, past financial mistakes etc., to name a few
\n which kept traditional banks away from unbanked population. This has led significant percentage of population remained unbanked. Study by Federal Reserves in America claims that close to
\n
\n22%<\/a> of population are either unbanked or underbanked. Low credit worthiness, minorities etc. are the major reason for non-banked population in the US. Neo banks target such demography who fall under lower economic status, undeserved communities etc.<\/p>\n

Many neo banks made use of such noble cause and created their strategy around it. There are Neo banks which are targeting immigrants or LGBTQ, or African American communities specifically. Some of the examples are lined up below.<\/p>\n