Neobanks, often known as “challenger banks,” are fintech businesses that provide mobile and internet banking apps, software, and other technologies. Fintechs mainly focus on specific financial products, and they are more agile and transparent to their account holders than traditional brick and mortar banks. An important aspect to note would be, neobanks do not have a physical presence, and they are only available virtually.
Neobanks provide financial services through a website or mobile app, and their customer care is also made available over the phone.
That being said, many people are still concerned about the safety and reliability of neobanks since they do not have a physical presence. Rest assured, money held in a neobanking account is just as safe as money held in a traditional bank account, as a regular bank gives the underlying account.
In Singapore, all neobanks collaborate with regular banks to hold consumer funds in a bank account by the regulations set by the Monetary Authority of Singapore. Moreover, Neobanks are required to adhere to the same set of regulatory criteria, such as data localisation standards and two-factor authentication (2FA) for card-based transactions. Hence it is legal, safe, and definitely dependable. There is no need to be afraid that the cash in the account will disappear without you knowing.
Similar to a traditional bank account, each and every transaction has to be signed off by the account holder. One key advantage they have over traditional ones is that they aren’t reliant on old legacy systems. Therefore, they prefer to construct their platforms with a strong focus on safety and security.
Why should one consider Neobanks?
Firstly, opening an account in Neobank is tremendously easy as you would not have to travel to a physical bank and get a bank staff’s assistance to open an account. You are no longer filling up forms, getting hardcopy documents, and hours of waiting for your account to be set up.
Neobanks also have a significant cost advantage in operations because they don’t have physical branches. These cost savings are passed on to clients through cheaper application fees, account costs, and program costs.
Last but not least, it offers a more personalised approach. While old-school banks provide a wide range of financial services and goods to a broad audience, such as credit cards, insurance, and loans, neobanks cater to a more niche audience.
Neobanks in Singapore
In late 2020, the Monetary Authority of Singapore (MAS) unveiled four successful applicants to operate digital banks within the country. As of February 2022, there are 6 Neobanks in Singapore:
• Wise (Transferwise)
These entities see challenges in making a profit, securing funding, and even obtaining clients based on trends seen in earlier virtual banks in other markets.
Many banking customers reportedly still prefer to have a personal touch and served on an omnichannel basis through online apps and face-to-face interactions at physical branches, which incumbents feature compared to the challenger neobanks’ digital-only proposition.
Whether one chooses to have a neobank or a traditional bank for your financial services, both will provide financial tools to run your business processes and carry out your daily activities. Especially if you are a startup owner looking to automate and cut down on chunky financial operations, neobanks might be right up your alley.