Neobank

According to forecasts, the number of unbanked users will exceed 386 million by 2028. 

The growing popularity of such financial institutions is shown in the statistics on the increase in the total value of transactions carried out by neobanks over the past eight years:

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What is a neobank?

A neobank, also known as a virtual, digital, or internet bank, is a direct bank that provides its services exclusively on the web, without offering branch-based services to customers.

As of 2024, there are 272 neobanks worldwide, the most popular of which are Wallester, BlackcatCard, and Everestcard.

These innovative financial institutions are gradually taking the lead away from traditional physical banks. Indeed, thanks to their online accessibility, they can significantly improve the inclusiveness of the financial system.

This is especially true for rural and low-income populations in developing countries who do not have access to traditional bank branches.

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What are neobanks’ services?

There are neobanks on the market that provide services to individuals, businesses, and specialized services for teenagers. 

Depending on the target audience, the list of available services may vary.

Let's focus on the opportunities that neobanks offer to individuals.

#1. Current and savings accounts

Neobanks offer their clients current accounts for daily transactions and savings accounts with competitive interest rates.

#2. Online payments and money transfers

These digital services typically support domestic and international money transfers. Plus, the fees for them can be many times less than traditional banks, and the speed of the payment is faster.

#3. Debit cards

Many neobanks offer debit cards linked to virtual accounts. They allow you to withdraw funds from ATMs and pay in offline shops anywhere in the world.

#4. Lending

Most neobanks offer different types of credit products. Borrowers can apply for money loans, credit cards, overdrafts, etc.

#5. Mobile banking

Interaction with virtual banks is mainly carried out via a mobile app. This provides users with easy 24/7 access to their finances.

#6. Investing

Many neobanks offer their customers the opportunity to invest in shares, exchange-traded funds, or cryptocurrency.

In the chart below, you can see which services of neobanks are the most demanded by users.

Advantages of neobanks over traditional financial institutions

Compared to traditional banks that serve customers through networks of branches, neobanks have several advantages.

• Accessibility. Neobanks provide their services via mobile applications. This makes them available to users 24/7, regardless of their location.
• Budget savings. Typically, neobanks charge lower fees for their services than traditional banks.
• Innovative functionality. Neobanks are known for implementing progressive features, including real-time transaction notifications, analytical tools, working with cryptocurrency, etc.
• High speed of service. All transactions at neobanks, including opening accounts and executing transfers, are faster than at conventional banks.
• Focus on inclusiveness. Virtual banks focus on serving categories of the population that are not sufficiently covered by banking services. Firstly, this applies to lending, as a usual bank cannot issue a loan to a borrower without a credit history.

Lending to unbanked people involves turning to digital scoring systems that use alternative data for neobanks to assess the creditworthiness of borrowers.

This optimizes credit risk management and increases the target audience.

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How RiskSeal can help neobanks

RiskSeal, a digital credit scoring solution, opens up a wide range of opportunities for neobanks by using digital footprint analysis to evaluate applicants.

We scan 140+ online platforms and return 300+ data points about potential borrowers and their credit score to our clients.

RiskSeal's alternative credit scoring system allows neobanks to: 

• Expand the reach of their services. They can lend to individuals without a traditional credit score or credit history.

• Prevent fraud. The platform enriches customers' scoring models with alternative data and offers innovative methods to verify applicants. It helps to identify fraudulent behavior at the application stage.

• Reduce the probability of default. The use of alternative data allows the lender to get a complete picture of the borrower's ability to pay and objectively assess the likelihood of timely repayment.

What is neobanking? This is a promising branch of the modern financial ecosystem that makes banking services more accessible to the public.

High speed of service, security of operations, round-the-clock access to finances – all this is possible thanks to innovative technologies and the working methods of neobanks.

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