Recent innovations have changed the landscape of finances in a volatile and changing world. New actors have appeared to catch up with traditional players who have dominated the financial world for many years. Between these actors we can find Neo banks, a new generation of financial entities that are 100% digital, that have a high level of efficiency and provide products within the reach of a larger population. Likewise, Neobanks are part of the Fintech sector, which involves companies that offer financial products and services through business models based on technology and digital innovation.
The impact of these new financial entities has been great all over the world. Let´s just take two examples in two different parts of the world
Nubank: This Neo Bank from Brazil has become the biggest digital bank in the world by number of customers with 40 million as of 2021 (Techcrunch). Although it started as a company in Brazil that offered only a free credit card with a line of credit of R $ 50 (around USD $ 10), constant innovations have put Nubank where it is today. It is important to say that Nubank is currently the largest Fintech in Latin America, helping millions of people in a region characterized by informality, to overcome barriers by offering a variety of financial services through their smartphone application (Olhar Digital, 2021).
Revolut: Europe biggest Neobank was founded in 2015 and in just 5 years the company has grown exponentially. For example, just in 2020, the company reported $361 million in revenue, which represents a 57% increase compared to 2019 revenue of $229 million. Why is this? Revolut has been launching a ton of products to diversify its sources of income. It is increasingly becoming a financial super app with checking accounts, debit cards, merchant services, insurance products, premium subscriptions, cryptocurrency trading, and more (Techcrunch, 2021). Thus, these innovations allow them to attract new consumers who were looking for options different from those of traditional banking.
This is only part of the impact of Neobanks and the Fintech sector in general. But, does this implicate that traditional banks and financial institution need to make Fintech their enemies? Not really. The potential collaboration between this two can create even more efficiency in their processes. The agility, innovation and adaptability of Fintech can join the secureness, knowledge and licenses of traditional financial institutions.
Also, cost reduction is an important aspect that this collaboration implies since Fintech have lower costs but can be more efficient than banks. For example, for banks going to market with Fintech solutions that have already been validated by the market or that can be quickly validated in conjunction with banks is cheaper and less risky than going out and testing your own innovations. Furthermore, among other benefits, this collaboration allows banks to shorten the learning curve, while creating disruptive teams and new business opportunities.
Collaboration between these actors can create better things and make it easier for people while increasing its scope. However, it is important to keep a well stablish communication, create an environment that is committed synergy and be alert to the traditional players who just want to join in order to take advantage of Fintech.
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