Neobanks are no longer a thing of the future; they are a thing of the now (I couldn’t pass up the opportunity to reference the Matrix in a blog title).
Haven’t heard of Neobanks? Consider this your crash course.
A Neobank can be described as an institution that (typically) provides checking, debit cards and some form of savings account without the actual physical presence of a branch. Neobanks are incredibly innovative and tech savvy also, featuring options like mobile deposits, P2P payments, mobile budgeting tools and real-time digital receipts. Most surprisingly, in the U.S., these institutions are – directly or indirectly – FDIC insured. An important distinction between a Neobank and a typical “internet bank” is that they don’t actually house or hold any funds. Every one of the deposits they keep/run is through a chartered financial institution.
Why should you care about Neobanks?
I would be lying if I said I wasn’t at first hesitant about Neobanks. As a former banker, I tend to operate under assumptions and notions that are compliance- driven. However, as a member of the millennial generation, this level of innovation excites me for the industry. Recently, I read an article about a Neobank in Canada, Koho, which is marketing and targeting the 18-35 year old consumer to engage in a new way of banking. Koho is partnering with an FDIC – insured institution to bring a suite of low to no cost services to its users.
Koho will be offering a short-term cash flow forecast to show people an estimate of their available funds; automated deposits to help users reach savings goals; and my personal favorite- the ability for consumers to set card restrictions to protect them from, say, buying a pair or $430 stilettos from Nordstrom or two rounds of Fireball at last call in Seattle…. (not that I know anything about the aforementioned statements). This startup Neobank is staying nimble; remaining innovative and flexible to respond to consumer demand, and most importantly, shifting the paradigms associated with what is possible in banking.
Neobanks could potentially change the way we bank- that’s why you should care. My professional recommendation is to keep an eye on these new players in the financial industry, folks. I believe there will be an enormous following and a new competitor in the financial landscape in the next five to ten years.