Neobanks:
The new era of Saudi banking or just another fancy word?
This is how Lulwah, our marketer & value creator, starts her opinion piece and continues:
Should we allow our fascination with the power of tech to blind us from the Truth?
Of course not! But hold on, let me demonstrate my case first.
Neobanks are bridging gaps, easing the ways for users and merchants to make thousands of daily transactions that vary in complexity from direct and easy to medium-complexity transactions or digital activities.
I’m sure that many of you have used an e-wallet or a payment app by now; as a digital bank or neobank, I don’t know about you but there’s no day passes without me using such an app as we are transmitting into a cashless society, they’re a fast way to pay a colleague back for grabbing lunch for me, and mostly they have a cool user experience and design undertaking the electronic commands smoothly.
So, what’s the truth that can’t be ignored? Bear with me, we’ll get to that.
Can it get any more confusing?
Not very long ago, the term “digital bank” was heard. Yet, with that wave of traditional banks transforming their services to be digital or having a digital arm, the term “Neobank” entered the scene, and things got pretty messy. What’s really a digital bank and how different it is from a neo-bank?
Digital Bank:
Digital banks have a limited physical existence, and most of their presence is online. Normally, they’re established by or partnering with a traditional bank or financial institution which allows them to operate under their license and act as their digital arm through obtaining an agent license such as the EMD Agent license, that enables the digital banks to act on behalf of another firm that’s registered as a financial institution – as defined by Electronic Money and Electronic Money Institutions, and the Law on Payment Institutions.
They don’t only allow customers to perform banking transactions digitally but also to undertake banking activities that are usually performed through physical branches, such as accounts opening, money deposits, and investment.
Examples of digital banks:
- Chime Bank, which is partnering with The Bancorp Bank and Stride Bank N.A (USA)
- Meem, which’s partnered with Gulf International Bank – GIB (KSA, BH)
Neobank:
Neobanks are independent direct banks that operate exclusively online with almost zero physical presence. They’re virtual and provide a complete banking experience through mobile applications. They are known for their speed, low cost, advanced security, user-friendly interface, for being less regulated than traditional and digital banks, and for their innovative spirit. Neobanks are customer-oriented and offer personalized or more customized services, and they can integrate one’s whole financial portfolio into one single platform. They operate under an independent license, such as EMI license – Electronic money institution, or informally known as an e-wallet license- or a Payment Solution license obtained from SAMA in the Saudi Market. Neobanks enable users to do many actions such as money management and financial planning, conducting banking transactions, pay bills, shopping with even a virtual currency that can be exchanged for physical currencies, withdraw money, trading, and more!
Examples of neobanks:
- Revolut, established as an independent financial institution in the UK.
- stcpay, partnered with STC Group (KSA)
The Undeniable Truth
Well, it’s been two years since the last time I visited a bank. Thanks to the advanced tech integrations between banks, digital banking activities, and neobanks. However, they weren’t enough! Yeah, don’t think I’m going to let banks get away with this!
Digital banks and neobanks are not here to replace each other or the traditional banks, yet to enhance the experience of users and tap more into efficiency. So, starting a neobank or a digital bank thinking they’ll be a solution to the user’s claimed dissatisfaction with banks activities is not the right path to take. Yet, thinking of the real pains of a segment of users when using banking activities is a good way to go, and in that regard, the digital solution would be serving multiple stakeholders including traditional banks.
One area that’s being compromised still in the banking industry, in general, is Customer Service. Yes, I say it loud and clear. And as banks for individuals are an important matter in their life construct, one keeps hoping that they won’t ever need to contact or go to a bank for any issue or request due to the headache that’s going to face them until their request is solved. It’s a fact that customer service is a crucial edge for businesses to have, it could make or break the business endeavors to increase the market share.