Neobanks:

Disrupting Traditional
Banking
Name: Anchal Bhatia
02413788821
B.Com(H)

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 INTRODUCTION
The traditional banking model is undergoing a major disruption as
neobanks emerge on the scene, offering a digital-first approach to banking
services. These innovative financial institutions operate entirely online,
eliminating the need for physical branches and reducing overhead costs
what enables them to provide customers with lower fees and better interest
rates compared to traditional banks. Neobanks have gained significant
traction since the 2008 financial crisis, attracting customers seeking
transparency, convenience, and affordability. However, while the future
looks promising for neobanks, they still face challenges such as building
trust, regulatory compliance, and limited service offerings.
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 The Impact of Neobanks on
Traditional Banking:

Neobanks have had a profound impact on traditional banks, forcing them to

adapt and innovate in the digital realm. The rise of neobanks has led to a
wave of digital transformation within the banking industry, with conventional
banks investing in their digital platforms to compete effectively. However,
neobanks have a significant advantage when it comes to agility and
customer experience. Their ability to quickly pivot and respond to market
trends and customer feedback positions them as leaders in the industry.
Therefore, traditional banks, which often struggle with outdated processes
and legacy systems, are working hard to bridge the gap and catch up with
their more nimble competitors.
CHALLENGES FACE BY NEOBANKS…

By actively engaging with regulators

Neobanks must overcome the and policymakers, neobanks can shape
Building trust with perception that they are policies that promote innovation and
customers remains a consumer protection. Additionally,
untested and unfamiliar. regulatory compliance requirements
significant hurdle, despite Advocacy and policy impact can create friction for smaller, agile
their reputation for play a crucial role in neobanks, limiting their ability to
transparency and customer- innovate and experiment with new
addressing these challenges. products and services.
centricity.

Therefore, policy insights and regulatory impact are essential in creating an environment
that fosters neobank growth while ensuring compliance with industry standards.

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 FUTURE OF NEOBANKS

!
The future looks promising for neobanks as digital banking
becomes more mainstream. They are expected to continue
growing and gaining market share. Neobanks may find
opportunities for growth by specializing in niche banking services,
catering to specific customer segments. By positioning themselves
as specialized providers, neobanks can differentiate themselves
from traditional banks and build a loyal customer base. The
changing consumer behavior and technological advancements
that drive the rise of neobanks will continue to shape the future of
finance.
 Neobanks business model

Neobanks employ various business models, and four of the most common strategies with distinct
revenue drivers are highlighted below.
1. Interchange as the main revenue driver: Neobanks, such as Chime, focus on generating revenue
through interchange fees. When customers use their neobank-issued cards for payments, the neobank
collects a fee. Additionally, these neobanks may generate income from interest earned on ATM fees and
cash.
2. Credit-led strategies: Some neobanks adopt credit-first business models, offering credit cards as their
primary product. Nubank, a Brazilian neobank, exemplifies this approach by deriving its main revenue
from credit card operations and Buy Now Pay Later (BNPL) features. Revenue is generated through
interchange fees, interest rates, and carried credit card balances.
3. Ecosystem-based strategies: Neobanks often build ecosystems centered around their core product,
utilising APIs to integrate with various services. Revolut is a leading example of this strategy, offering
access to investment opportunities in the stock market, cryptocurrencies, commodities, insurance, and
more. By expanding their product offerings, these neobanks increase revenue streams.
4. Product extension strategies: Certain challenger banks focus on product extensions as a core part of
their business model. This entails expanding their offerings beyond basic banking services. They may
provide additional financial products and services, such as loans, savings accounts, or wealth
management solutions, to diversify revenue streams.
 Industry growth outlook
Neobanks have emerged as disruptive forces in the
banking industry, leveraging digital technology to
offer customers a faster, more affordable, and
convenient banking experience. While they have
made significant strides, neobanks face challenges
in building trust and navigating regulatory
compliance. However, their impact on traditional
banks cannot be ignored. In this changing
landscape, companies like SAXE Global play a
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and asset protection. As neobanks continue to
disrupt traditional banking, SAXE Global can
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 THANK YOU

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