Why Neobanks Are the Future of Personal Finance: 3 Products That Prove It

Nov 8, 2024

Neobanks, also known as digital or challenger banks, have attracted millions of customers worldwide with their streamlined financial services, user-friendly platforms, and low or no fees. Unlike traditional banks, neobanks are built with a fully digital infrastructure, which enables them to operate flexibly and with reduced overhead – they also have no retail footprint. This has led to a surge in customer interest, particularly among younger, tech-savvy users who value mobile access and fast transactions.

The global neobank market is anticipated to grow significantly over the next decade, from $66.82 billion in 2022 to $2.05 trillion by 2030.  Neobank user accounts worldwide are expected to rise from 18.95 million users in 2017 to 250.74 million users by 2023 and to 376.89 million users by 2027.

 

Number of customer accounts at neobanks worldwide (in millions).

Source: https://www.nature.com/articles/s41599-024-03138-7

 

3 Neobank Products Shaping the Future of Finance

Neobanks are pushing boundaries with products that redefine traditional banking functions. Here are three examples showing how these digital banks are delivering practical solutions to meet today’s financial needs.

 

1. Chime’s MyPay: Personalized Payroll Solutions

Chime, one of the most popular neobanks in the United States, recently introduced MyPay – an innovative tool designed to offer users unprecedented control over their paychecks. With MyPay, customers can receive their paychecks up to two days early, which can be a significant advantage to employees needing immediate funds access. This feature empowers users to manage their finances proactively and helps them avoid late fees.

In addition, MyPay makes it easier for customers to allocate their pay directly to various financial goals, from saving accounts to investments. This added flexibility can make managing personal finances more straightforward and more intuitive than traditional banking models offer.

 

2. MoneyLion’s Checkout: In-App Financing for a Seamless Shopping Experience

MoneyLion’s Checkout feature integrates financial services with e-commerce experiences. Aimed at making online purchases more affordable and manageable, Checkout allows users to finance purchases directly within the app, offering competitive terms and personalized loan amounts — even interest-free installment payments — based on user profiles. This product is an example of how neobanks can go beyond providing banking services—they are increasingly becoming financial partners that support users’ everyday purchasing decisions.

 

3. N26’s Stocks and ETFs Trading & Split the Bill Feature

N26, a leading European neobank, offers a unique value proposition with its Stocks and ETFs trading feature, allowing users to invest directly from the app. This service is designed for ease of use, and specifically targets individuals new to investing. With a low barrier to entry, N26 enables users to diversify their financial portfolios effortlessly, empowering more people to participate in wealth-building activities previously reserved for traditional brokerage services.

In addition to investment tools, N26 also offers a Split the Bill feature, which allows users to quickly divide expenses within the app. This tool is particularly popular among users who participate in shared financial activities, such as group dinners or travel expenses.

 

How Neobanks Can Stay Ahead

The competition in the neobank industry is fierce, but continuous innovation will be key to long-term success. Here are a few strategies that will help neobanks stay ahead:

• Continuous Innovation: Neobanks must prioritize agile development cycles to keep up with customer expectations and technological advancements, such as AI and blockchain.
• Customer-Centricity: Neobanks thrive on customer feedback and user experience, so maintaining a customer-first approach is essential. This means using data to personalize services and offering responsive and efficient support channels.
• Transparency and Trust: Trust is the foundation of any banking relationship. Neobanks must ensure they are transparent with all fees, data use, and security measures. Clear and open communication will be key to attracting and retaining customers.
• Strategic Partnerships: Collaborating with fintech companies, technology providers, and even traditional financial institutions can help neobanks expand their offerings, access new markets, and introduce innovative technologies.

 

The Future Outlook for Neobanks

Neobanks have disrupted traditional banking by setting new standards for financial services in a digital-first world. With innovative products like Chime’s MyPay, MoneyLion’s Checkout, and N26’s investment tools, they are addressing real-world financial needs more effectively than ever. As they continue to prioritize innovation, customer experience, and transparency, neobanks will be well-positioned to lead the future of finance.