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Beyond User Experience: How Neobanks Are Solving Core Banking Problems

Prove
November 17, 2022

Just like how the quantum theory questioned stereotypical notions of physics and challenged common ideas around concepts of reality, neobanks are doing something similar to the banking industry. Digital banking is no longer a theory; in fact, it has evolved to become part of our everyday lives. According to CEO Brandon Krieg, Stash has had over 3 million customers since 2015. The reason they’ve been so successful: they’ve studied the consumer, and discovered that the average person wants to live a better financial life: the average user is a 29-year-old who makes $50k a year. With their app alone, they’ve made it easy for people to invest and learn about it.

We could conclude that companies are hyper-focused on personalization. As the digital bar continues to be raised, the successful ones are meeting the customer where they are and are finding ways to connect advice, banking, and investing in one experience.

Globally, the leading success factor for the growth of major neobanks seems to be superior customer experience compared to the incumbent players. With redesigned mobile and web applications and smooth customer onboarding, players like Monzo, Atom, and Starling Bank have grown significantly. By eliminating costs associated with physical branch maintenance, neobanks are able to reduce the fees associated with key products (e.g., Revolut with their FX card). Neobanks are able to focus on creating a flowing and unique user experience and develop forward-thinking in-app features. Recently, a Revolut customer took to Twitter to share his experience on how there was suspicious activity on his card and how he was able to cancel the old card and order a new one with no extra fees; his money was safe and accessible in just a few clicks on the mobile app.

More Than Customer Experience: How Neobanks Address Core Issues

While enhanced customer experience is the key, it isn’t the only success ingredient required for success, especially in the APAC region where incumbent players already have mobile applications redesigned for a better experience. Indian players like Open and InstantPay have been successful by offering great user experience.

The challenging task is to go deeper and solve leading core banking problems which the incumbent players aren’t able to answer. Players like Open are thinking beyond user experience to understand what product innovation and customer service can be offered. Open went a step further to integrate automated accounting and payment gateways with their current account offering. Their platform enables startups and SMEs to integrate banking and accounting in one place using a multi-bank connect feature. With an additional Expense Card launched in partnership with Visa, Open helps startups and SMEs to manage employee expenses in a seamless way. Another leading player, InstantPay, is focused on bridging the gap which traditional banks have not been able to since the inception of banking in India. They drive financial inclusion in a responsible and sustainable way and have reached 10,000+ PIN codes and cater to 50 million unique customers.

“Most Startups & SMEs generally use multiple dashboards and interfaces for invoices, bookkeeping, and online payments. Making vendor payments and employee payouts have always been a challenge. All of this drains entrepreneurs and finance teams of their time & energy.” – Anish Achuthan, CEO of Open.

Similarly, other players in the APAC market are going deeper and solving core banking problems for the economy. With a lot of focus on banking problems for the gig economy to SME solutions and even startup-focused banking solutions – these players want to disrupt the incumbent players. Furthermore, their systems don’t face the traditional challenges of CBS (core banking system) like ‘knowledge transfer,’ ‘undocumented logic,’ ‘technical debt,’ and a ‘skills/desire gap.’

Now we are not saying that neobanks in the West are successful only because of their stellar user experience, but we can’t ignore the fact that traditional banks in the Western markets don’t have an excellent user experience. By redesigning the experience, the neobanks are able to gain a considerable amount of traction. Moving towards the APAC markets, neobanks have to take a step further by answering core banking problems in the industry. Now which players will be able to solve it, only time will tell.

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