Nobody can deny that money is something vital in our lives: it allows us to travel, create companies, invest, or buy assets, among many other things.
And that is why a new way of understanding banking is being developed as we know it today, and as it always was: neobanks are born. And believe me when I tell you that they have come to stay.
What is the Neo bank? What are your advantages and disadvantages? How can it affect me?
We will also see a very developed concept, at the same time as the neobanco, which are the “challenger banks”. But everything in its time.
Let’s start at the beginning.
Understanding the concept of Neobanco: origin and causes
It was the year 2008. Traditional banking went bankrupt in the United States, the big banks, so strong and booming at the time, fell into depression, and with them, their credibility and confidence. Chaos reigned throughout the world for a moment.
Then, from the ashes of the banking crisis, new financial companies sprang up, the fintech (an abbreviation taken from the words “financial technology” -financial technology in English), with revolutionary ideas: why not change what we always understood as Bank? Why not get closer to society, to the common people, to our partners?
Little by little some banks were opening their minds, and ran to develop new ways of doing business; that’s what happens with crises: either you adapt or you die.
And is that banking today is not what it was:
Closure of many branches throughout the country.
in all the country. Replacement of the physical cashier of a lifetime by a set of ATMs at the entrance of the branch. Image depleted due to unorthodox techniques of selling their financial products, such as subprime mortgages (rubbish), or preferred.
Given this state of affairs, it is logical that new companies have wanted to seize the moment, and take the hegemony of the world bank, hand in hand with entrepreneurs who know what they do.
The phenomenon of the Neobanks in Spain
In our country, the news usually arrives a little later than in other countries, but they arrive.
Neobanks in Spain are now a reality: you only have to look through the internet, especially in digital newspapers, to find an advertisement for a debit card or checking account, with a lot of advantages and they have sneaked in between them. The booming business of the new era.
Are there any in our country? Of course, mainly two:
Bnext
Originally from Madrid, since 2016 it has already 25,000 active users. And it is that the advantages offered are not few: account without fees or requirements, the possibility of withdrawing money abroad without commissions.
But how do they earn money then, if they do not charge me anything? Very easy: every time you request a loan or mortgage for your app, Bnext charges the provider of that service, not the final customer.
interesting? I think so. Let’s keep going.
Monese
English Neobanco, direct Bnext competition. One of its main characteristics is that it allows creating a current account for both European residents and non-residents.
With its slogan: free yourself from traditional banks, it is a great bet for technology and speed when handling money online.
Welcome to inclusive banking.
Atom Bank
The most recommended neobank in the United Kingdom, where through its benefits and a simple and customizable application together with the low-interest rate of its tariffs, it made Atom Bank achieve a substantial increase in its users.
Currently, BBVA, which was decisive in the evolution of this new concept of the bank, owns 30% of the capital of this company, so we could say that the Spanish bank has made a strong commitment to this new banking method.
Types of neo-banks
And this business has two ways to develop, namely:
- The result of traditional banking development: banks today know that they have to adapt to the needs of the client; If not, they would perish. The current client has a greater knowledge of financial products, which gives him more decision-making power, something that banks must assimilate in order to retain their clients in some way.
- That is why they found it necessary to wash their face, in a desperate attempt to save the furniture. Banks today know that they have to adapt to the needs of the client; If not, they would perish. The current client has a greater knowledge of financial products, which gives him more decision-making power, something that banks must assimilate in order to retain their clients in some way.
- That is why they found it necessary to wash their face, in a desperate attempt to save the furniture. Financial startups: they are closely linked to the concept of fintech, which brings up a new way of understanding the financial industry, characterized by the application of new technology and financial tools, such as Big Data, Blockchain, mobile payment applications and tokenization (substitution of the credit card number by security tokens-numbers when paying with a card in the store).
Advantages and disadvantages of the Neo Banks
Now let’s take a quick look at the benefits and not so benefits of hiring a service like that, because we know very well that everything that glitters is not gold.
Benefits: why can they compete with traditional banking?
- The possibility of opening the account in another country: it is over having to take root in a specific country for a bank to open its doors.
- It’s over having to take root in a certain country so that a bank opens its doors to you. 100% technological: we know that to err is human, so to rely more and more on technology is a necessity nowadays, due to the amount of information and tasks that we must manage.
- We know that to err is human, so to rely more and more on technology is a necessity nowadays, due to the amount of information and tasks that we must manage. Cryptocurrencies: many neobanks allow to operate with cryptocurrency, such as Bitcoins, Litecoins, Ethereum. No problems. It is a great bet for the currency of the future, which does not have to be physical.
- Many neobanks allow operating with cryptocurrency, such as Bitcoins, Litecoins, Ethereum … No problems. It is a great bet for the currency of the future, which does not have to be physical. Financial services 2.0: the band of all life is corroding in its oxidation. Many financial companies are starting to take over, with improved products, clearly with more than obvious advantages.
- The band of all life is corroding in its oxidation. Many financial companies are starting to take over, with improved products, clearly with more than obvious advantages. Cheaper products: the fact of having offices makes the traditional bank has had to find money under the carpets to take the boat to a good port.
- The fact of having offices makes the traditional bank has had to find money under the carpets to bring the boat to fruition. Effective security measures: mobile fingerprint and facial recognition, among others.
Disadvantages of these types of banks
Mainly there are two:
Mistrust, the product of a way of thinking anchored in the past. For many, the fact that there is no physical office to claim is definitely a strong reason to deposit their sense of insecurity in this business.
The product of a way of thinking anchored in the past. For many, the fact that there is no physical office to claim is definitely a strong reason to deposit their sense of insecurity in this business. Ignorance: one of the main obstacles that neobanks have to face, having to elbow their way. It is necessary to educate the client so that he can change his mentality: move from the traditional bank to a 2.0.
Explain a bit about the banking license
A credit institution license is a right of a financial company to operate as a bank, requested by the challenger bank, which we will see below.
Actually, it is an official administrative authorization, which must be requested from the Bank of Spain (at least in our country).
The request is not exhausted there, but the body that grants it is the European Central Bank, although the first carries out the first filter.
There is a modality, used by neo-bancos, to be able to function in our country, with the name of electronic money license. Serves exclusively to make online payments transfers. The request is exactly the same as the banking license.
And what is that of the challenger bank? Is there any difference with the Neo Banks?
In effect: the Challenger Banks are financial companies that have a banking license, which allows them to handle physical money.
The Neo Banks, on the other hand, can only settle for creating financial app, money transfers online, without being able to plant an office in any part of the territory of the country.
The objective of the challenger bank, or its client model, is the millennials, which are the most distrustful with respect to the banks of a lifetime.
To approach this type of client, the challenger banks offer a multitude of advantages, very competitive within the financial niche, such as:
Efficient and fast communication: they even reach you through WhatsApp.
- From anywhere in the world, even if they are not yours. They take customer opinion into account: this is key to growing in the business world. The unilateral relationship that once existed between banker and client ended. Now, these new banks listen, attend and offer solutions. In summary: bilateral communication.
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What challenger banks work in Spain?
Revolut
English financial startup, born in 2015: 3 million customers, a card, possibility of acquiring cryptocurrencies. Little more to say, a fabulous alternative especially for the most travelers, because with it you can buy with any currency on the other side of the world.
It has 3 possibilities: 1 freemium (without monthly cost) and 2 premium, with more advantages, logically.
Ferratum bank
This fintech bank originating in Malta, offer a free checking account, sending money through SMS, MasterCard, and many other things. A good alternative, without a doubt.
Bunq
With this curious name, the Netherlands issues its challenger bank proposal in our country: your smartphone as a center of operations. The long queues in the entities are over, with Bunq you have all your financial products and the possibility of contacting your bank at the swype: savings, cards, international payments 8 times cheaper and business functionalities.
N26
Perhaps the best known financial startup option in our country, and it is not for less; This German company is strongly committed to the sector: one and a half million customers spread across 18 countries, commissions at 0%, interesting mortgage options, MasterCard premium and freemium cards, as a Spotify subscription.
In fact, he soon opens his third office in Spain.
Conclusion: the financial revolution has come to stay
Life is growth. He who thought that everything would remain the same over the years, has not understood how the story works.
And it is that the great banking sector, formed by the unscrupulous lobbies that are only interested in their benefit, sooner or later had to be hurt.
Here is the great bet of the future: soon the whole society will know what a neobank is, because time will bring this great bet to people.