- With neobanking users growing at 35% annually since 2017, its transaction value is rising quickly.
- Neobanking has been welcomed by more tech-savvy users who see it as a proper alternative to traditional banking.
Neobanking is attracting younger generations looking for convenience and accessibility. Banks have had to respond by creating digital alternatives, such as mobile apps or online banking. Users, especially those between 18-34 years old, are looking for solutions that meet their needs.
Neobanking platforms offer various services, including digital payments, financial planning, budgeting and saving tools, and credit scoring services. According to BanklessTimes.com, over the next four years, neobanking’s transaction value is anticipated to surge by an impressive 18.25% CAGR and reach $8.86 trillion by 2027.
Jonathan Merry, Bankless Times CEO, commented on the data:
BanklessTimes CEO Jonathan MerryPeople are moving away from traditional banking and embracing Neobanking. By the end of 2022, about 356 million people globally were neobank account holders. Not to mention the transaction value in 2022 was $66.62 billion. The convenience of neobanks is clearly driving its market growth.
Why is the Transaction Value Expected to Rise?
Neobanks, for starters, have a lower operating cost which favors the account holders. Neobanking is done purely online; hence no need for physical infrastructure, which calls for higher operating costs. Thus,neobank users have the advantage of low transaction costs and ideal interest rates, which are set to lure more users to neobanking, driving its market value.
Neobanks use artificial intelligence. The incorporation of AI helps to create a personalized experience for neobank users. The users are provided with excellent financial advice and a detailed status of their transactions and account activities. With that in mind, many will likely jump over to neobanking, increasing its market growth.
AI also allows for quicker processes. Neobanks are available all year round at any time of day or night. They function effectively, thanks to AI, which provides solutions to users who experience challenges almost instantly. Neobanks are thus convenient even for investors looking for faster transaction rates.
Neobanks are more secure, considering their infrastructure is based on new technology. Neobanks have taken stringent measures to protect their consumers, building consumer trust and confidence, therefore, calling consumers to use neobanks often for their payments.
Drawbacks of Neobanking
Despite the numerous advantages of neobanking, there are still a few drawbacks. Neobanks offer limited service options, meaning customers may not be able to access certain services from them compared to traditional banks.
Neobanks also come with low-interest rates and require high account deposits. This makes it more difficult for consumers with low incomes or insufficient money saved up.
Moreover, neobanks may not be the best choice for consumers who prefer face-to-face communication, as neobank services are digital and mostly automated.
Neobanking, however, has proven to be competent, accessible, and reliable. Undoubtedly, more people will begin to adopt neobanking, and its transaction value will hit the expected value by 2027.
