Future of Banking for Millennials and Gen Z
Neobank’s Digital-first Approach is Magnetizing Younger Generations
The emergence of digital-first institutions called “Neobanks” has made financial services more accessible and user-friendly.
The rise of neobanks at the forefront of the financial evolution is rewriting the rules of how we manage and transfer our money.
What Is a Neobank?
A neobank is a digital-first financial institution that operates exclusively online, without physical branch locations.
Unlike traditional banks, neobanks don’t rely on legacy infrastructure, brick-and-mortar branches and legacy systems.
Instead, they utilize the power of technology to simplify banking and deliver a modern financial experience through transparent fee structures, user-friendly mobile apps.
Neobanks are Growing Rapidly
Neobanks are still a relatively new phenomenon. However, they are growing rapidly. The growth is driven by the surging needs for digital banking and a rising hunger for innovative financial products.
Some 20 percent of the UK population has an account with a digital-only neobank (McKinsey).
The value of transactions is set to grow at a rate of 18.16% annually between 2023 and 2027, reaching a total of US$9.24 trillion by 2027 (Statista).
Examples of Neobanks
Magnetizing the Digital-First Generations
A digital-first approach to banking, neobanking, are focusing on millennials and Gen Z customers, while other new banks focus on small businesses or underserved communities.
Neobanks are resonating with the mindsets of Gen Z and Millennials. These generations are known for their tech-savviness, diverse perspectives, and unique financial attitudes.
Gen Z: Growing Up with Technology
Gen Z, born between the mid-1990s and the early 2010s, represents the first wave of true digital natives. They grew up in an environment where technology was an integral part of their upbringing.
This generation never knew the world without smartphones, social media, and instant connectivity. Tech-savvy Gen Z population expect banking to seamlessly fit into their digital lifestyles.
Millennials: Pioneers of Online Banking
Millennials, born between the early 1980s and mid-1990s, are not digital natives, but they were early adopters of online banking and digital payments. They prefer the convenience of internet banking and electronic transfers early on.
Millennials prefer the user-centric interfaces and innovative features that neobanks bring to the table, such as automated savings tools and financial tracking.
Streamlined Account Opening
One defining feature of neobanks is their streamlined account opening process. Unlike traditional banks which often involve lengthy paperwork and multiple in-person visits, neobanks allow customers to open accounts within minutes.
Right from your smartphone.
With simplified identity verification procedures and minimal documentation requirements, Neobanks have made it easier than ever to access banking services.
Having lived in Japan, Germany, and the UK, I’ve experienced the rigorous identity verification processes across these countries.
The need to visit physical branches, fill out lengthy forms, and wait for approvals can significantly hinder the efficiency and accessibility of financial transactions.
Transparency in Fees
Neobanks are known for their low fees and transparent pricing structures as the fees are generally listed on their website or in their mobile app. Besides, neobanks are typically less expensive than traditional banks, with no hidden or overdraft fees.
Low fees and transparent pricing give neobanks a competitive edge in the financial industry so that they can attract customers who are tired of complex pricing structures at other banks.
For instance, Revolut provides an International Money Transfers calculator, allowing customers to precisely determine the fees before initiating a money transfer.
But the story doesn’t end. We’re going into the decentralized economy.
Crypto and Neobanking Intersection
As cryptocurrencies gain popularity as an alternative investment, more individuals and businesses are seeking platforms for managing digital assets. Neobanks are generally enthusiastic about innovating in the crypto space.
Now many neobanks are offering cryptocurrency-related services, allowing customers to buy, sell, and hold digital assets like Bitcoin, Ethereum, and more. All within a mobile app or online portal.
This convergence simplifies the management of digital assets, making it accessible to both beginners and experienced cryptocurrency traders.
Crypto-centric Neobanks will be the gateways to the world of cryptocurrencies.
A Bridge Between Crypto and Banking
The crypto service provided by neobanks enables users to seamlessly switch between fiat currencies, commodities, and digital assets.
This integration simplifies financial management, creating new opportunities for investment diversification.
Furthermore, mass adoption of cryptocurrencies will catalyze the expansion of the decentralized finance (DeFi) ecosystem.
Final Thoughts
I think people accustomed to convenience may not easily revert to conventional one. It’s interesting to know there are some differences between emerging banks, neobanks and challenger banks.
Although neobanks primarily offer fundamental banking services, challenger Banks go a step further by providing a broader selection of traditional financial services, including loans, credit cards, and investment opportunities.
Indeed, my investor friend and I found such disruptive neobank’s services to be remarkably convenient and efficient.
It’s fascinating to witness the trend in neobanking along with the continued development of blockchain technology in the financial sector, expanding their services into cryptocurrencies.
Author
Miyoko Shimura has over 8 years of engineering experience in the technology industry bringing together analytical perspectives.
DLT Mentor at German think-tank Frankfurt School Blockchain Center and Technical Editor at Coinmonks. For further updates please follow me on LinkedIn or Twitter 🌏
Portfolio https://linktr.ee/miyokoshimura
